Stocks skid on credit woes

NEW YORK (CNNMoney.com) -- The Dow industrials plummeted more than 200 points at the start of Thursday's session following more credit worries from BNP Paribas and AIG.

The Dow Jones industrial average (down 186.48 to 13,471.38, Charts) tumbled by as much as 241points, before paring some losses to stand 160 points, or 1.1 percent lower.

The broader S&P 500 (down 19.30 to 1,478.19, Charts) dropped 1.4 percent while the tech-fueled Nasdaq Composite index (down 17.88 to 2,595.10, Charts) slipped 0.8 percent.

Stocks sank after French bank BNP Paribas said it was hit by problems in the U.S. subprime mortgage sector. The bank said it was freezing three funds because current conditions make it impossible to value their assets.

AIG, the world's largest insurance company, warned Thursday morning that it saw mortgage delinquencies spreading after posting better-expected quarterly earnings late Wednesday. AIG (down $0.45 to $66.03, Charts, Fortune 500) shares tumbled more than 5 percent on the news.

Adding to those credit worries was news that the European Central Bank injected $130 billion to European banks to help calm liquidity concerns.

European stocks tumbled on the news while Asian markets finished higher.

Treasury prices rose in a flight to quality, sending the yield on the benchmark 10-year note to 4.78 percent from 4.88 percent late Wednesday. Bond prices and yields move in opposite directions.

The pullback comes on the heels of a dramatic day on Wall Street. Stocks plunged in the last hour of trading Wednesday but rallied in the final minutes of the session to end sharply higher.

Stocks have gyrated recently amid concerns about credit conditions and the ongoing housing slump, and turbulence is likely to continue Thursday.

Stocks in focus include Rupert Murdoch's News Corp. (down $0.35 to $22.45, Charts, Fortune 500), which reported a rise in quarterly profit after the market close Wednesday, boosted by ad sales and its cable channels.

In major corporate news, Home Depot (down $2.45 to $35.35, Charts, Fortune 500) said Thursday it was in talks with private equity buyers about lowering the sale price of its HD Supply unit from $10.3 billion and that it was reducing a previously announced tender offer, sending its shares over 5 percent lower on the New York Stock Exchange.

The movie rental chain Blockbuster (up $0.15 to $4.38, Charts, Fortune 500) said it bought film download service Movielink. Terms of the deal were not disclosed.

On the economic front, jobless claims climbed more than expected last week, the Labor Department reported, while the four-week moving average inched higher.

Jobless claims rise more than expected. Number of new claims increases by 7,000 to 316,000 in the second straight weekly hike; four-week moving average inches higher.

Oil prices eased, with U.S. light crude for September delivery slipping $1.14 to $71.09 a barrel in electronic trading.