The major market indicators extended their slide to levels not seen in more than a decade Thursday, as investors contended with more disheartening economic data, fresh concerns about the stability of General Motors Corp., and ongoing uncertainty about the financial system.
Stocks fell across the board, with the beleaguered banking sector posting some of the steepest losses. Shares of troubled Citigroup Inc., still shaky despite receiving billions in government aid, sank below $1. General Motors, meanwhile, dropped below $2 as it warned of possible bankruptcy.
The market is also extremely anxious ahead of Friday's February Labor Department report that is likely to show the loss of hundreds of thousands of jobs. Even some positive news, including some better-than-expected retail sales and factory orders, was not enough to stoke investor confidence.
The reports failed to show a significant improvement and so the market gave back its big gain from Wednesday, said Doreen Mogavero, president of brokerage Mogavero, Lee & Co.
"The economic data is still obviously a huge worry," she said. "I don't think anyone thinks we're in the clear because the market was up yesterday."
Stocks fell initially after China deflated investors' hope that it would take new steps to stimulate its economy, but the discouraging economic data sent stocks even lower. The hope that China would unveil more government spending to help its economy was a major factor behind the market's bounce Wednesday, which sent the Dow Jones industrials up nearly 150 points. The rally followed a five-day pummeling.
In midday trading, the Dow fell 201.91, or 2.94 percent, to 6,673.93, a low not seen since April 1997. The Standard & Poor's 500 index dropped 26.09, or 3.66 percent, to 686.78. The S&P has not traded below this level since October 1996. The Nasdaq composite index fell 36.80, or 2.72 percent, to 1,316.94.
The Russell 2000 index of smaller companies fell 15.87, or 4.27 percent, to 355.43.
On the New York Stock Exchange 2,797 stocks fell, while only 235 advanced. Volume came to 720.8 million shares.
Investors moved out of stocks and back into safer assets like Treasurys and gold.
"We have the same story," said Alan Skrainka, chief market strategist at Edward Jones. "We have concerns about the stability of the financial system, concerns about the economy getting worse, and just a lack of confidence."
Wednesday's rally, built on the hope that China could boost its spending, showed how hungry the market is for good news, analysts said. But there are just too many other dismal economic factors to contend with that make a rally hard to sustain.
The Commerce Department said Thursday that orders for manufactured goods fell by 1.9 percent during the first month of the year. While this was better than the 3.5 percent drop economists had expected, it marked a record sixth straight month of declines.
Meanwhile, government data showing that initial unemployment claims fell more than anticipated last week failed to buoy stocks. Economists surveyed by Thomson Reuters/IFR predict the Labor Department on Friday will report that U.S. employers slashed 648,000 jobs in February — more than the 598,000 jobs cut in January.
"We know that there are lots of job losses," said independent market analyst Edward Yardeni. "The initial claims data didn't change that perception."
Rising unemployment is of particular concern because it means many consumers have less to spend. And consumer spending, which accounts for more than two-thirds of U.S. economic activity, is crucial to helping the economy turn around. A handful of better-than-expected retail sales reports weren't enough to convince investors that consumer spending is improving.
Wal-Mart Stores Inc.'s sales jump in February beat expectations and the company raised its dividend. Other retailers such as Wet Seal Inc. and Limited Brands Inc. posted declines that were narrower than anticipated.
Wal-Mart rose $1.19, or 2.5 percent, to $49.68. Wet Seal rose 14 cents, or 6.5 percent, to $2.31, while Limited fell 62 cents, or 8.8 percent, to $6.40.
The future of General Motors also plagued investors. The automaker said in its annual report that auditors raised serious doubt about its ability to continue operating. GM has already received $13.4 billion in federal loans, and is seeking a total of $30 billion from the government. GM dove 40 cents, or 18.2 percent, to $1.80.
Financial stocks suffered more losses Thursday after Moody's Investors Service said concerns about capital levels may lead it to downgrade the ratings of Bank of America Corp. and Wells Fargo & Co. The ratings agency also lowered the outlook on JPMorgan Chase & Co.'s ratings to negative. Bank of America shares dropped 40 cents, or 11.1 percent, to $3.19; Wells Fargo plunged $1.76, or 18.2 percent, to $7.90; JPMorgan tumbled $2, or 10.4 percent, to $17.30.
Government bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.84 percent from 2.98 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.22 percent from 0.25 percent Wednesday.
Gold prices advanced, even as the dollar rose against other major currencies.
Light, sweet crude fell $1.27 to $44.11 a barrel on the New York Mercantile Exchange.
Markets overseas were mostly lower. Britain's FTSE 100 fell 3.18 percent, Germany's DAX index dropped 5.02 percent, and France's CAC-40 fell 3.96 percent. Earlier, Japan's Nikkei stock average rose 1.95 percent after Wall Street's Wednesday rally, but Hong Kong's Hang Seng index fell 0.97 percent.