NEW YORK (CNN/Money) -
U.S. stock markets tumbled Thursday, bruised by record high crude oil prices and jitters ahead of Friday's monthly employment report.
Due at around 8:30 a.m. ET, the report is expected to show that employers have added 245,000 jobs to their payrolls in July after June's less-than-impressive addition of 112,000 jobs. Unemployment is expected to hold steady at 5.6 percent, according to a consensus of economists surveyed by Briefing.com.
On Thursday, the Dow Jones industrial average (down 163.48 to 9,963.03, Charts) lost 1.6 percent. With a one-day drop of more than 163 points, the Dow registered its worst one-day point loss since March 11 of this year.
The Nasdaq composite (down 33.43 to 1,821.63, Charts) lost around 1.8 percent and closed at its lowest level since September 30 of last year.
The Standard & Poor's 500 (down 17.93 to 1,080.70, Charts) index lost 1.6 percent and closed just above 1080, seen as a key technical support level. It marked an eight-month closing low for the S&P.
The payrolls report is key to satisfying lingering concerns about the strength of the labor market after a tough three years. In addition, the report will be seen as providing hints about what the Federal Reserve might do when it meets next week to discuss short-term interest rates.
"Tomorrow is an important day in terms of the jobs report," said Brian Bensch, investment manager at Melhado, Flynn & Associates. "We need to hit it or beat it, or we could see some real selling."
NYMEX light crude oil futures settled at a new all-time closing high of $44.41 Thursday, up $1.58 a barrel.
Amid ongoing supply concerns, the latest blow was dealt Thursday afternoon when reports said that the Russian government has barred embattled oil company Yukos from accessing its bank accounts, without which it may not be able to continue exports.
While the market has been keeping an eye on the rise of energy costs all year, stocks have been particularly tied to the movement of the commodity over the last few weeks. High energy prices, when sustained, can feed inflation and hurt corporate profits.
Bensch says that the combination of a weaker jobs report and continue high oil prices might be too much for the S&P 500 to withstand, sending it much lower, and the broader market with it.
"The employment number can be in line tomorrow, but it can't miss," said John Hughes, a market analyst at Shields & Co.
Hughes said that if the payrolls number is very strong, say close to 350,000, that could be the catalyst the market has been lacking for some time to push it higher. But any bounce off the employment report is bound to be short lived, he added, since the market is so event driven right now.
What moved?
Overall losses were broad-based, with 29 out of 30 Dow components falling. Caterpillar (CAT: down $2.08 to $69.62, Research, Estimates) was the biggest loser, down nearly 3 percent.
All 20 of the Nasdaq's most heavily weighted issues declined on the session, including Yahoo! (YHOO: down $1.11 to $26.80, Research, Estimates), down 4 percent.
Soft July retail sales numbers added to the muted tone.
Gap (GPS: down $1.59 to $19.79, Research, Estimates) posted a surprising 5 percent drop in July sales at stores open a year or more, short of expectations for a modest gain. The company also lowered its second-quarter earnings estimates to a range below Wall Street predictions. Shares fell 7.4 percent and topped the New York Stock Exchange's most-active list.
Wal-Mart Stores (WMT: down $1.15 to $52.05, Research, Estimates) said sales rose 3.2 percent, just barely above the 3.1 percent analysts were expecting, and the stock declined more than 2 percent.
A number of pharmaceutical issues fell.
European regulators have rejected a marketing application for Exubera, an inhaled insulin drug, from Pfizer (PFE: down $0.75 to $31.65, Research, Estimates) and European firm Aventis. Pfizer lost 2.3 percent and development partner Nektar Therapeutics (NKTR: down $6.14 to $10.45, Research, Estimates) tumbled 37 percent in active Nasdaq trade.
Boston Scientific (BSX: down $2.41 to $33.90, Research, Estimates) lost 6.6 percent after saying it was expanding the recall of its Taxus drug-delivering stent.
Shares of United Online (UNTD: down $2.67 to $11.18, Research, Estimates) tumbled more than 19 percent in active Nasdaq trade after reporting weaker-than-expected second-quarter revenue that fell from a year ago. The parent of Internet service providers NetZero and Juno also cut its subscriber-growth forecast for the year.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 11 to four on volume of 1.38 billion shares. On the Nasdaq, decliners topped advancers by around the same ratio on volume of 1.56 billion shares.
The morning's weekly jobless report showed 336,000 people filed new claims for unemployment last week , from an upwardly revised 347,000 the previous week. That was shy of the 340,000 new claims that economists surveyed by Briefing.com were predicting.
Treasury prices rose, pushing the 10-year note yield down to 4.38 percent from 4.42 percent late Wednesday. The dollar pulled back versus the yen and euro.
COMEX gold added 10 cents to settle at $394.80 an ounce.
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