NEW YORK (CNN/Money) -
The Dow hit a two-month low, pacing a broad stock sell-off Thursday sparked by record high oil prices, weak earnings from GM and a fallout in the insurance sector after New York Attorney General Eliot Spitzer sued several firms.
The Dow Jones industrial average (down 107.88 to 9,894.45, Charts) lost nearly 1.1 percent, closing at its lowest level since August 13.
The Standard & Poor's 500 (down 10.36 to 1,103.29, Charts) index, and the Nasdaq composite (Research) both lost 0.9 percent.
Surging oil prices and GM's weak earnings and forecast sent stocks tumbling in the morning. Declines accelerated in the afternoon when news about the insurance sector broke.
All of these factors combined to weigh on stocks, said Todd Salamone, vice president of research at Schaeffer's Investment Research.
"Certainly oil is on trader's minds, and there's the poor reaction to earnings from GM and SanDisk," Salamone added. "And then you have AIG and the insurance sector, where even after all the corporate scandals in the last few years, investors keep having to encounter these types of things."
A number of companies released earnings after the close Thursday.
Sun Microsystems (Research) reported a narrower quarterly loss after the close, sending its shares higher in after-hours trade.
Juniper Networks (Research) reported quarterly sales and earnings results that rose from a year ago and topped estimates. The company also boosted current-quarter sales and earnings estimates. However, shares fell 8 percent in after-hours trade, as investors took a sell-the-news response.
Friday brings little in the way of earnings, but plenty of economic news.
Reports are due Friday morning on business inventories, producer prices, manufacturing in the New York City region, retail sales, industrial production, capacity utilization, consumer sentiment and the Treasury Budget.
While investors will take notice of all of them, the retail sales figures probably have the most potential for moving the market.
Due at around 8:30 a.m. ET, retail sales are expected to have risen 0.7 percent in September, according to a consensus of economists surveyed by Briefing.com. Sales fell 0.3 percent in August. Sales excluding the volatile auto component are expected to have risen 0.3 percent, after rising 0.2 percent in August.
"With oil hitting new highs almost every day, there are a lot of questions about how consumers are being hit at the gas pump," Salamone said. "The retail sales numbers will offer some clues."
Insurers under fire
Eliot Spitzer announced that he has sued insurance broker Marsh & McLennan (down $11.28 to $34.85, Research) for bid-rigging in a complaint naming AIG (down $6.99 to $60.00, Research) and other insurers as participants.
Additionally, two executives from AIG and one from ACE (down $3.84 to $36.47, Research) have pled guilty to criminal-fraud charges for their involvement, according to reports.
Following the news, Dow component AIG fell 10.4 percent. Ace lost 9.5 percent. A number of other insurance stocks declined as well.
Oil prices closed at a new high again Thursday, after the release of the weekly inventory report. Crude inventories and gasoline inventories both rose more than expected. But distillate inventories fell, and traders apparently chose to focus on that.
U.S. light crude for November delivery briefly touched a record high of $54.88 a barrel on the New York Mercantile Exchange, before edging back down to settle at $54.76, a gain of $1.12.
"We've had some not-great earnings news, such as GM," said Timothy Ghriskey, chief investment officer at Solaris Asset Management. "But to us, the biggest issue remains oil. Crude up at these levels is a concern for the consumer and for corporations on a global level."
In the day's biggest earnings news, GM reported results of 78 cents a share, just shy of a year earlier but well short of forecasts. The No. 1 automaker also warned that full-year results would miss earlier forecasts.
GM (down $2.46 to $38.84, Research) stock sank 6 percent.
"Everyone knows growth slowed in the third quarter, and so for a company like GM to miss is not surprising, considering that it's so reflective of the economy and impacted by oil prices," Ghriskey said.
Movers
Among other companies reporting results, SanDisk (down $7.68 to $20.52, Research) plunged 27.2 percent. The maker of computer-memory cards reported quarterly sales and earnings late Wednesday that rose from a year earlier but missed expectations.
Citigroup (down $0.41 to $43.70, Research) said it earned $1.02 a share, up from 90 cents a year earlier. That was 3 cents more than analysts were expecting. The world's largest financial services firm said growth in consumer businesses tempered a decline in stock and bond-market revenue.
However, Citigroup also reported revenue that missed expectations, and that's what investors focused on in early going. The shares fell just short of 1 percent.
Financial company Bank of America (down $0.81 to $44.20, Research) reported earnings in line with estimates, based on revenue that missed forecasts. Shares lost 1.8 percent.
Chipmaker Novellus Systems (down $2.38 to $24.50, Research) warned late Wednesday that sales, earnings and orders will all fall in the fourth quarter from the third. That overshadowed the company's in-line third-quarter earnings, and shares fell nearly 9 percent.
That pressured the semiconductor sector, sending the Philadelphia Semiconductor (down 12.65 to 380.60, Charts) index, or the SOX, down 3.2 percent.
Hewlett-Packard (down $0.52 to $18.38, Research) fell 2.8 percent after Morgan Stanley cut it to "equal weight" from "overweight," citing the Dow component's loss of market share and vulnerability to increased competition.
On the upside, Apple Computer (Research) jumped more than 13 percent in active Nasdaq trade. Late Wednesday, the company reported fiscal fourth-quarter earnings and revenue that rose from a year earlier and surpassed expectations, thanks to strong sales of its iPod. Apple also boosted its sales and earnings forecast for the fiscal first quarter.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers nearly three to two as 1.48 billion shares changed hands. On the Nasdaq, losers topped winners by more than two to one as nearly 1.60 billion shares traded.
Of jobs and the deficit
Morning economic news was mostly negative.
New jobless claims rose to 352,000 from an upwardly revised 337,000 the previous week. Economists expected a smaller rise.
Another report showed that the cost of importing goods inched higher in September, although less than expected. Export prices rose as well.
Finally, another report showed that the U.S. budget deficit hit a record in fiscal 2004.
Treasury prices rose, pushing the 10-year note yield down to 4.01 percent from 4.05 percent late Wednesday. In currency trading, the dollar was little changed versus the euro and higher versus the yen.
COMEX gold rallied $4.90 to settle at $419.50 an ounce.
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