Stocks Plunge on Jobs, Gloomy Fed Statement

Sept. 22, 2011 — -- The U.S. stock market plummeted after a rocky of day of trading on Thursday.

The Dow Jones industrial average fell 391.01 points, or 3.51 percent, closing at 10,733.83. The NASDAQ ended the day down 3.25 percent at 2,455.67.

Early in the day, the Dow was down more than 500 points. U.S. stock markets started a sell-off Wednesday after the Fed announced its latest effort to boost the economy but added that there are "significant downside risks" to the global economy.

Global stock markets followed the negative trend reflected on the U.S. markets.

Thursday had the biggest one-day point and percentage drop on the Dow since Aug. 10. It was also the biggest two-day point drop on the Dow since November 2008, when the economy was in the depths of the recession.

Thursday's drop erased a year of progress on the Dow. It closed at 10,739 on Sept. 22, 2010, just slightly higher than today.

Investors are clearly panicking about the threat of another recession in the U.S. and Europe.

European leaders cannot seem to come up with a bold consensus to deal with the crisis in their economies, while there was yet another example of the bickering in Washington as GOP leaders failed to pass a stop-gap funding bill in Congress.

"There is a lot of bad news out there about the global economy and also a worry that no one is going to do much about it," said Hugh Johnson, chairman of Hugh Johnson Advisors. "It was a dark day on Wall Street."

Stephen J. Carl, principal and head equity trader with The Williams Capital Group, said that the markets continued to "snowball" after the Federal Reserve's cautious economic outlook on Wednesday, followed by a jobless claims report this morning. On Wednesday evening, the Dow Jones industrial average closed down 284 points at 11,125.

"The stock markets stabilized initially today but just continued to fall," he said.

The Labor Department announced this morning that applications for unemployment claims fell 9,000 last week to 423,000, higher than the 420,000 claims economists expected.

Phil Orlando, chief equity strategist with Federated Investors, said investors were ignoring the silver lining this morning and focusing on the negative, mainly deeper fears of a sovereign default in Greece and its effect on the Eurozone.

Orlando said it was good news that jobless claims fell, though 400,000 claims or lower would indicate a healthier economic environment for employment.

"It doesn't bode for a great number in September but, hopefully, it will be better than August, which was zero," he said.

The U.S. economy added no jobs in August, leaving the unemployment rate at 9.1 percent.

Orlando said the claims figures and a drop in stocks in European and Asian markets contributed to the U.S. stock market's tumble.