Wall Street freefalls as fear trade fuels sell-off

2011-08-05 07:00:12

A trader works on the floor of the New York Stock Exchange in New York, the United States, Aug. 4, 2011. The sell-off in the Wall Street accelerated on Thursday, with the blue-chip Dow plunging more than 500 points, as investors rushed out of equities and other riskier assets on fears of an economic slowdown and European debt contagion. (Xinhua/Shen Hong)

NEW YORK, Aug. 4 (Xinhua) -- The sell-off in the Wall Street accelerated on Thursday, with the blue-chip Dow plunging more than 500 points, as investors rushed out of equities and other riskier assets on fears of an economic slowdown and European debt contagion.

All three major indexes ended down more than 10 percent from 2009 highs and technically in the correction territory after Thursday's plunge.

Basic materials and energy sectors were leading the slide, plunging about 6 percent after crude prices tumbled more than 5 percent and settled at the lowest level since Feb.18.

The worst day for stocks since January 2009 came partly because contagious concerns on the European debt problems reemerged in the market

On Thursday, after leaving the interest rate unchanged at 1.5 percent, the European Central Bank said it resumed buying government bonds after a four-month break in response to the deepening sovereign debt crisis.

Fears of a worsening debt scenario sent European shares tumbling and the Wall Street quickly followed suit.

Thursday's data came in better than expected, but still pictured a tepid economy.

The Labor Department said on Thursday that weekly applications for unemployment benefits edged down 1,000 to a seasonally adjusted 400,000, the lowest in four months.

The report showed the jobs market may slowly recovered, but the initial claims have been hovered at or above 400,000 since March. Meanwhile, recent data such as manufacturing, consumer spending and hiring by private companies were all below the levels considered indicative of a healthy, growing economy.

As of Thursday's close, the Dow Jones industrial average tumbled 512.76 points, or 4.31 percent, to 11,383.68. The Standard & Poor's 500 plunged 60.27 points, or 4.78 percent, to 1,200.07. The Nasdaq Composite Index plummeted 136.68 points, or 5.08 percent, to 2,556.39.

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