Major U.S. stock indices plunged today, taking the stock market into negative territory for February.
Unexpectedly high U.S. unemployment claims reported today sparked fresh concerns about the economy while European sovereign debt fears have spread beyond Greece.
The S&P 500 Index dropped 34.17 points, or 3.11 percent, to close at 1,063.11. The Dow Jones Industrial Average lost 268.37 points, or 2.61 percent, to close at 10,002.18, barely above the psychologically important 10,000 level.
Aside from commodities-related firms, financial shares declined the most as investors sold on fears of financial contagion. Goldman Sachs (NYSE:GS) dropped 4.17 percent today and Morgan Stanley (NYSE:MS) dropped 4.52 percent. The Dow Jones U.S. Financials Index finished down 3.9 percent.
European banks, which are more exposed to risks emanating from Greece, fared worse. Barclays (NYSE:BCS) dropped 9.61 percent and Royal Bank of Scotland (NYSE:RBS ) dropped 7.09 percent.
While economists surveyed by Bloomberg forecasted that unemployment claims would decrease for the week ending on January 30, to 455,000, the actual released figure this morning was 480,000. It was an 8,000 increase from the figure reported a week ago.
Unemployment has been a major source of public discontent in recent times. President Obama has promised to make job creation his main focus for 2010 and also allotted $100 billion in his 2011 budget for that purpose.
The discouraging unemployment claims report today has investors worried ahead of tomorrow's report of the U.S. unemployment rate, which has been at or above 10 percent since last October.
Ever since the European Commission issued its statement on Wednesday backing Greece's plan for cutting spending and raising certain taxes, traders have been eyeing other countries, notably Spain and Portugal. The credit default swaps on the sovereign debt of the two countries have widened since the announcement.
Talks of the Greek contagion are surfacing today in publications such as the Wall Street Journal and Financial Times. Telegraph.co.uk titled one article Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal.
Reports that Greek workers are striking against the austerity plans have also surfaced, intensifying fears about the feasibility of Greece's plan to cut its budget deficit. Customs officials and tax collectors have staged a strike.
Various parties, especially government employees, have threatened to strike since the announcement of the austerity measures. According to a BBC report, farmers have already been protesting for weeks, demanding more government assistance.
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