NEW YORK -- Turmoil returned to U.S. stock markets at Thursday's open as renewed concerns about the U.S. and global economies sent major indexes plunging and pushed gold to a new record high.
The Dow Jones industrial average dropped 480 points, or 4.2%, after falling as much as 528 points. The S&P 500 was down 54 points, or 4.5%; and the Nasdaq Composite lost 126 points, or 5%.
All 30 members of the Dow were in the red, with Bank of America shares plunging 8%. Only three members of the S&P 500 were trading higher.
Investors had bad news hitting them from multiple fronts, including a dismal forecast from Morgan Stanley for global economic growth, and several economic reports that showed significant slowdown in the U.S. economy.
A gloomy report from Morgan Stanley renewed fears over a slowing global economic recovery. The investment bank slashed its global growth outlook for 2011 and 2012, adding that the United States and Europe are "hovering dangerously close to a recession."
Morgan Stanley cut GDP forecasts to 3.9% in 2011 and 3.8% in 2012, down from 4.2% and 4.5%, respectively. Growth will be particularly sluggish in developed nations, with GDP averaging an increase of 1.5%
"The fact that Morgan Stanley has downgraded its global growth forecast really highlights the concerns and problems facing the global economy," said Michael Hewson, market analyst at CMC Markets in London. "It begs investors to question where future growth will come from."
"I think we're seeing a bit of a delayed reaction to the Sarkozy and Merkel meeting earlier this week, as investors realize that policymakers are out of ideas," Hewson said, noting that an unnamed bank tapped the European Central Bank's emergency liquidity fund for $500 million overnight.
Investors moved into traditional safe havens of U.S.-backed bonds and gold. The price on the benchmark 10-year U.S. Treasury jumped, pushing the yield down to a record low yield of 1.99% from 2.16% late Wednesday.
Gold futures for December delivery rose $32.90 to $1,826.90 an ounce, hitting a new intraday record of $1,829.40 eariler in the session.
U.S. stocks ended mixed Wednesday, as investors weighed the latest corporate results against global economic and debt concerns.
Economy: Morgan Stanley's dire commentary was combined with four disappointing U.S. economic reports.
The Labor Department reported that weekly jobless claims rose by a worse-than-expected 9,000 claims to 408,000 in the week ended Aug. 13. Economists surveyed by Briefing.com had expected jobless claims to rise by 5,000 to 400,000 claims.
The government also reported on Thursday that Americans paid more for consumer goods and services in July, as inflation rose more than expected over the month. The Consumer Price Index, rose 0.5% in the month -- led by a 4.7% increase in gas prices from month to month.
Economists expected a 0.2% rise in July, according to a survey from Briefing.com.
After the open, investors got two ugly reports on existing home sales and manufacturing activity.
The Philadelphia Federal Reserve's regional index plunged to a reading of minus 30.7 in July, showing severe contraction in economic activity last month. The number was far worse than expected, with economists expecting a reading of plus 0.5.
The National Association of Realtors said existing home sales dropped by 3.5% in July, far worse than the 2% rise that the market was looking for.
World markets: European stocks were sharply lower in afternoon trading. Britain's FTSE 100 fell 3.7%, the DAX in Germany sank 5.3% and France's CAC 40 tumbled 4%.
Asian markets ended in the red. The Shanghai Composite fell 1.6%, the Hang Seng in Hong Kong dropped 1.3% and Japan's Nikkei shed 1.3%.
Companies: Dow component Hewlett Packard reports its quarterly results after the closing bell on Thursday. Analysts are looking for the computer maker to post a profit of $1.09 per share.
Shares of McGraw Hill Publishers dropped by 5% on Thursday after the Justice Department said it was investigating rating agency McGraw subsidiaryStandard & Poor's for allegedly overrating mortgage-backed securities. The mortgage securities meltdown led to the 2008 financial crisis, according to a report published Thursday.
The stock price for Sears Holdings fell more than 6% after the retailer reported a disappointing quarterly loss of $1.13 per share.
Currencies and commodities: The greenback gained strength against the euro, Japanese yen and the British pound.
Oil for September delivery plunged $2.65 to $84.90 a barrel.Copyright © 2014, The Baltimore Sun