Tough day on Wall Street

NEW YORK (CNNMoney.com) -- Stocks tumbled Thursday, with financial, commodity and technology shares leading the charge lower as investors continued to worry about the credit market crisis and the strength of the consumer.

The Dow Jones industrial average (Charts) lost 0.9 percent. The S&P 500 (Charts) index lost 1.3 percent. The Nasdaq composite (Charts) declined 1 percent.

Small caps were hit harder with the Russell 2000 (Charts) index falling 1.4 percent.

Treasury prices rallied, lowering the corresponding yields. The dollar recovered a bit against the euro but fell versus the yen. Oil and gold prices slipped.

Stocks were mixed throughout the morning as investors mulled steady consumer inflation, stronger readings on manufacturing and the latest credit market troubles - amid a decline in oil prices.

But the market began deteriorating heading into the afternoon, reflecting the recent pattern of gyrating throughout the session and then making a decisive move near the close.

And more selling may be on tap, said Joseph Saluzzi, co-head of equity trading at Themis Trading.

He said that with the exception of Tuesday's blockbuster rally, Wall Street's been pretty negative of late and that could continue leading into the Thanksgiving holiday next week.

Friday brings readings on industrial production and capacity utilization, as well as a speech from Federal Reserve Governor Randall Kroszner, a voting member of the central bank's policy committee.

The Consumer Price Index (CPI) rose 0.3 percent in October, matching September's rise and meeting forecasts. So-called "core" CPI, which excludes food and energy, rose 0.2 percent, also matching September and also in line with forecasts.

Investors have been looking for signs that pricing pressures are remaining mild, even with lower interest rates and higher oil and gas prices threatening to drive up inflation.

The weekly jobless claims report showed a surprisingly large jump in new claims last week.

The fact that the CPI came in as expected was probably positive, although it shows inflation pressures remain a risk, said Douglas Roberts, chief investment strategist at Channel Capital Research.

He said the rise in jobless claims was worrisome in that if the trend continues to higher levels of unemployment - at the same time that pricing pressures remain steady - that will pressure the already taxed consumer. Consumer spending fuels around two-thirds of the economy.

"But crude inventories came out kind of confirming that the pressures from oil are dipping in the short term," Roberts said.

U.S. light crude oil for December delivery fell 66 cents to settle at $93.43 a barrel on the New York Mercantile Exchange after the weekly oil inventories report showed a surprise gain in crude supplies last week. (Full story)

Two more banks were in focus, amid ongoing questions about the fallout from the credit market crisis.

Barclays Capital, a unit of Barclays Group PLC (Charts), said it took $2.7 billion in writedowns related to the credit market. The figure was smaller than what some analysts were calling for a week ago. Additionally, the U.K.-based bank said that 2007 profits are running ahead of last year's performance.

Additionally, Swiss financial behemoth UBS (Charts) could take up to $7.1 billion in writedowns, related to the deteriorating mortgage market, according to a Wall Street Journal article Thursday.

Also reflecting the credit market turmoil, General Electric confirmed reports that a short-term bond fund it manages has suffered big losses in mortgage-backed securities and that as a result, outside investors have dumped their holdings. However, the conglomerate said that the impact won't be felt in current quarter or full-year earnings. GE (Charts, Fortune 500) shares lost 1.8 percent.

A variety of bank stocks retreated, including JP Morgan (Charts, Fortune 500), Citigroup (Charts, Fortune 500), Morgan Stanley (Charts, Fortune 500) and Merrill Lynch (Charts, Fortune 500).

J.C. Penney (Charts, Fortune 500) said that third-quarter earnings fell from a year ago and warned that full-year profits will miss forecasts as well. (Full story).

In other news, Kraft Foods (Charts) said it will sell its two dozen Post cereals to Ralcorp Holdings (Charts) in a stock deal worth $1.7 billion, plus the assumption of debt.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost 4 to 1 on volume of 1.47 billion shares. On the Nasdaq, decliners topped advancers by 7 to 3 on volume of 2.34 billion shares.

In addition to CPI and jobless claims, two regional manufacturing reports were released Thursday.

The Philadelphia Fed index rose to 8.2 from 6.8 in November, topping forecasts for a dip to 5.0. Earlier, the NY Empire State index fell to 27.4 in November from 28.8 in October, versus forecasts for a steeper drop to 18.0.

Treasury prices rose, lowering the yield on the 10-year note to 4.15 percent from 4.25 percent late Wednesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar rebounded a bit against the euro and declined versus the yen.

COMEX gold for December delivery fell $27.40 to $787.30 an ounce.