Wall Street staggers
Dow falls 220-plus points as economic worries add up: big loss at AIG, spike in consumer credit, weak retail sales and woes at Citi.
NEW YORK (CNNMoney.com) -- Stocks slumped Thursday as investors eyed reports showing higher consumer borrowing costs, weaker spending and more financial sector woes and opted to step back.
Bond prices jumped - lowering the corresponding yields - as investors sought safety in government debt. The dollar strengthened versus the euro and fell versus the yen.
The Dow Jones industrial average (INDU) lost 220 points, or 1.9%, while the broader Standard & Poor's 500 (SPX) index lost 1.8%.
The tech-heavy Nasdaq composite (COMP) lost 1.0%, fending off bigger losses thanks to gains in big tech stocks such as Microsoft (MSFT, Fortune 500) and Intel (INTC, Fortune 500).
A report released in the late afternoon showed that consumer borrowing costs increased in June at the fastest pace in seven months. The selloff seemed to pick up the pace after that.
"We're going to continue to see this choppiness until we get this financial mess behind us and until we start getting better economic news," said Ron Kiddoo, chief investment officer at Cozad Asset Management.
He said that between AIG's quarterly loss, the weak retail sales reports and the jump in jobless claims, investors are clearly not getting any relief just yet.
Friday brings earnings reports from Fannie Mae (FNM, Fortune 500) and MBIA, as well as the second-quarter read on productivity and the June report on wholesale inventories.
Financial woes: Late Wednesday, insurer AIG posted a steeper-than-expected quarterly loss of $5.36 billion due to massive writedowns related to the credit collapse. The Dow component reported a profit a year earlier. On a per-share basis, the company lost 51 cents excluding one-time items, versus forecasts for a 63-cent gain. Shares of AIG (AIG, Fortune 500) fell over 18% Thursday, dragging on the Dow.
In more bad news for financials, Citigroup (C, Fortune 500) agreed to buy back over $7 billion in auction-rate securities after the New York Attorney General said the company misled investors. Citi shares lost 6% as investors bet that third-quarter earnings will be impacted by the news. (Full story)
A variety of financial shares declined, including Bank of America (BAC, Fortune 500), Merrill Lynch (MER, Fortune 500) and Lehman Brothers (LEH, Fortune 500).
Fuel prices: U.S. light crude oil for September delivery rose $1.44 to settle at $120.02 a barrel on the New York Mercantile Exchange after ending the previous session at a three-month low.
Oil prices had slipped nearly 20% since peaking above $147 a barrel in July. But the price of crude bounced back Thursday on concerns about oil-producing Iran's nuclear program. (Full story).
Retail gas prices dropped more than a penny overnight, extending the downward trend for a 21st day, according to a survey of gas station credit card activity. (Full story).
Wal-Mart and other retailers: The world's largest retailer reported July sales at stores open a year or more rose 3%, short of analysts' expectation that sales would grow 3.4%. Wal-Mart (WMT, Fortune 500) shares fell over 6%.
Fellow discount retailer Costco (COST, Fortune 500) reported sales rose 10%, topping forecasts, while Target (TGT, Fortune 500) said sales fell 1.2% - a bigger-than-expected drop.
A variety of retailers reported lackluster sales, reflecting the end of the impact from the government stimulus checks mailed out earlier this summer.
Clothing retailers were hit particularly hard, with both Abercrombie & Fitch (ANF) and Pacific Sunwear of America (PSUN) reporting steeper-than-expected declines. Abercrombie shares fell 10.6% and Pacific Sunwear fell 8.8%.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by over three to one on volume of nearly 1.28 billion shares. On the Nasdaq, decliners topped advancers two to one on volume of 2.28 billion shares.
Economy: Consumer spending has been hit by the current slowdown, the spike in fuel and food costs and a tighter labor market.
On Thursday, the government reported that the number of Americans filing new claims for unemployment last week rose by 7,000 to 455,000. That figure represents a more than 6-year high.
Other economic news was more positive. The June pending home sales index showed sales rose 5.3% in the month versus forecasts for a drop of 1%.
Other markets: In currency trading, the dollar was flat versus the euro and inched lower versus the yen.
In the bond market, Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.92% from 4.05% late Wednesday.
COMEX gold for October delivery fell $5 to settle at $873.80 an ounce. 
