Stocks fall further after jobless claims jump

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NEW YORK – Fresh worries about widening unemployment added to investors' list of concerns about the economy Thursday. The major indexes each fell more than 1.5 percent, including the Dow Jones industrial average, which lost 135 points.

Wall Street found fresh room for worry after new claims for unemployment benefits climbed to a 16-year high. The Labor Department reported that new applications for jobless benefits rose to a seasonally adjusted 542,000 last week from a downwardly revised figure of 515,000 in the previous week. That is well above economists' expectations of 505,000, according to a survey by Thomson Reuters.

Fears about the job market, the housing market, the overall economy and a stock market down 48.5 percent from its October 2007 peak have led consumers to sharply curtail how much they take out of their wallets. That's a troubling prospect for Wall Street as consumer spending accounts for more than two-thirds of U.S. economic activity.

Worries about the prospects for employment helped drive Wall Street's decline Wednesday. The Fed projected that the nation's average unemployment rate would rise to 6.3 percent to 6.5 percent this year and 7.1 percent to 7.6 percent next year. The level in October was 6.5 percent, and last year the rate averaged 4.6 percent.

Early Thursday, fears about employment and the ability of the automakers to continue to stay afloat continued to weigh on stocks.

In the first hour of trading, the Dow Jones industrial average fell 137.00, or 1.71 percent, to 7,860.28. The Dow on Wednesday tumbled below 8,000 and early Thursday fell below the 7,882.51 trading low seen on Oct. 10.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 19.88, or 2.46 percent, to 786.70, and the Nasdaq composite index fell 24.27, or 1.75 percent, to 1362.15.

Bond prices rose as investors sought the safety of government debt. The yield on the benchmark 10-year Treasury note fell to 3.16 percent from 3.32 percent late Wednesday. The three-month Treasury bill, considered one of the safest assets around, fell to 0.02 percent from 0.06 percent late Wednesday.

Investors who have been groping for a bottom to the yearlong market rout are now worried that Washington's disagreement over whether to bail out the auto industry could lead to bankruptcy of major automakers like General Motors Corp. and could send ripple effects through the economy — including a further blow to consumer confidence. Play Video

The plan to give U.S. automakers billions of dollars in government-backed loans remains troubled. Senate Majority Leader Harry Reid, D-Nev., canceled a planned vote Wednesday on a bill that would divert $25 billion for the auto industry from the $700 billion Wall Street financial rescue package. The Bush administration and congressional Republicans have rejected Democrats' plan to tap into that money.