NEW YORK (CNNMoney.com) -- Stocks closed sharply lower Thursday after Greece received another credit downgrade and the dollar rose on the U.S. central bank's cautious comments.
The Dow Jones industrial average (INDU) fell 133 points, or 1.3%. Declines were broad based, with 28 of the 30 Dow components ending lower.
The S&P 500 index (SPX) lost 13 points, or 1.2%. The Nasdaq composite (COMP) slipped 27 points, or 1.2%.
The stock slump came as the dollar rebounded 1.3% against the euro, to its highest levels since September. The greenback was also up sharply on the pound and slightly higher against the yen.
The dollar jumped Thursday for two reasons, according to Craig Peckham, strategist at Jefferies & Co. First, he said, were the "continuing jitters" after the Federal Reserve on Wednesday left interest rates unchanged near 0%, saying weakness would remain for some time. Adding to those fears were reports that Greece has been downgraded by Standard and Poor's.
S&P's move came after health care companies complained that the country was behind on payments related to its public health system, and it follows Fitch Rating's downgrade of Greece on Dec. 8.
Marc Chandler, chief foreign exchange strategist for Brown Brothers Harriman, said those downgrades and persistent worries about the economy are driving up the dollar -- and these concerns could carry extra weight amid "very thin" volume ahead of the holidays.
"Santa Claus is giving a little present to people like me, who are dollar bulls," Chandler said.
Despite posting gains early in the session, stocks ended mixed Wednesday after the Fed's interest rate announcement.
Financials take a hit: The slump slammed several bank shares, with Citigroup (C, Fortune 500) closing down 7.5%, American Express (AXP, Fortune 500) off 2% and JPMorgan Chase (JPM, Fortune 500) down 2.6%.
According to reports, the Treasury canceled plans to start selling off part of its 34% stake in Citi after its offering of 5.4 billion shares of common stock drew weak demand.
The offering was part of a plan Citi announced late Wednesday, in which the New York-based lender said it intends to raise $20.5 billion in the stock market in a plan to pay back its bailout funds.
"The market is struggling to absorb these staggering amounts of new issue," said Jefferies' Peckham. "Marry that with the overriding theme of caution, and investors will be nervous."
Bank of America (BAC, Fortune 500) said late Wednesday it appointed senior executive Brian Moynihan as its new chief executive officer. Moynihan is currently the president of consumer and small business banking. Exiting CEO Ken Lewis surprised the board of directors when he announced plans to retire in September. Shares were down 1.1%.
Economy: The Labor Department reported jobless claims rose unexpectedly last week, jumping by 7,000 to 480,000. Analysts predicted a decline to 465,000 new claims.
The November index of leading economic indicators, from the Conference Board, rose 0.9% -- beating expectations of a 0.7% jump.
The Philadelphia Fed index, a regional read on manufacturing, far surpassed expectations. The reading jumped to 20.4 in December, the highest since April 2005, from 16.7 in November. Analysts expected a decline to 16.0.
In Washington, a Senate Banking committee voted 16-to-7 to confirm Ben Bernanke for another four-year term running the Federal Reserve.
Companies: Before the start of trading Thursday, package-delivery firm FedEx (FDX, Fortune 500) reported earnings of $1.10 per diluted share, down from $1.58 one year ago.
FedEx issued cautious guidance for the third quarter of 50 to 70 cents per diluted share. That fell short of forecasts of 84 cents per share, and the stock price lost 6.1%.
After the market close Thursday, Oracle (ORCL, Fortune 500) reported a profit of 39 cents a share versus 34 cents a year ago. The software company's results beat analyst expectations of 36 cents per share.
Also after the bell, Nike (NKE, Fortune 500) reported a second-quarter profit of 76 cents a share, down from 80 cents a share. Analysts were looking for 71 cents a share.
Smartphone maker Palm (PALM) reported a wider-than-expected loss of 37 cents per share in its second fiscal quarter.
Palm's rival, Blackberry maker Research in Motion (RIMM), earned $1.10 per share, up from 69 cents a year ago. RIM shares were up about 11% in after-hours trading.
World markets and commodities: Stocks in Asia ended mixed, with Tokyo's Nikkei index falling 0.13% and Hong Kong's Hang Seng index off 1.22%. European indexes settled lower.
Crude oil for January delivery fell 1 cent to settle at $72.65 a barrel, while gold for February delivery plunged $28.80 to end at $1,107.40 an ounce.
Bonds were higher, with the benchmark 10-year yield slipping to 3.49% from 3.59% late Wednesday.
Market breadth was negative. On the New York Stock Exchange, losers beat winners almost three to one on volume of 1.7 billion shares. On the Nasdaq, decliners topped advancers almost three to one on volume of 1.9 billion shares. 
| Overnight Avg Rate | Latest | Change | Last Week |
|---|---|---|---|
| 30 yr fixed | 3.80% | 3.88% | |
| 15 yr fixed | 3.20% | 3.23% | |
| 5/1 ARM | 3.84% | 3.88% | |
| 30 yr refi | 3.82% | 3.93% | |
| 15 yr refi | 3.20% | 3.23% |
Today's featured rates:
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 32,627.97 | -234.33 | -0.71% |
| Nasdaq | 13,215.24 | 99.07 | 0.76% |
| S&P 500 | 3,913.10 | -2.36 | -0.06% |
| Treasuries | 1.73 | 0.00 | 0.12% |
| Company | Price | Change | % Change |
|---|---|---|---|
| Ford Motor Co | 8.29 | 0.05 | 0.61% |
| Advanced Micro Devic... | 54.59 | 0.70 | 1.30% |
| Cisco Systems Inc | 47.49 | -2.44 | -4.89% |
| General Electric Co | 13.00 | -0.16 | -1.22% |
| Kraft Heinz Co | 27.84 | -2.20 | -7.32% |
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