NEW YORK (CNNMoney.com) -- Stocks slipped Thursday, but managed to trim bigger losses, after worse-than-expected readings on manufacturing, housing and the labor market fueled fears that the economy is heading for another recession.
The S&P 500 (SPX) lost 3 points, or 0.3%, closing at its lowest point since Oct. 2.
"The combination of a weak weekly jobless claims number and a lower-than-expected manufacturing index helped send the market sharply lower throughout much of today," said Michael Sheldon, chief market strategist at RDM Financial Group.
However, on a positive note, the S&P 500 was able to touch and then bounce off a key level professional traders watch, Sheldon said, which could give the market some stability in the short term.
Declines were broad based, with 23 of the Dow's 30 components lower, led by Hewlett-Packard (HPQ, Fortune 500), Merck (MRK, Fortune 500), United Technologies (UTX, Fortune 500) and JPMorgan Chase (JPM, Fortune 500)
Stocks started higher Thursday as investors opted to dip back into select shares after a brutal second quarter. But the early buying fizzled after the release of the manufacturing and housing market reports.
An earlier reading on weekly jobless claims added to concerns that the economic recovery is losing steam.
Stocks slumped in the second quarter on worries that the European debt crisis would pressure an already struggling U.S. economy, potentially sending it into a double-dip recession. In the quarter, the Dow lost 10%, the Nasdaq lost 12% and the S&P lost just short of 12%.
However, the S&P 500 is off more than 15% from its rally highs in April, a threshold that could set the stage for a bigger sell-off in the weeks ahead. In the same period, the Nasdaq lost 16.6%.
"Earnings are decent and interest rates are low, but it's a nervous environment, from declines in net worth to issues of job security," said Steven Goldman, market strategist at Weeden & Co. "The public is unlikely to invest with this backdrop."
Manufacturing: The Institute for Supply Management's ISM index for June fell to 56.2 from 59.7 in May. Economists expected it to dip to 59. While any level over 50 indicates expansion in the sector, the slowing pace of activity was nonetheless a worry to market participants.
In other news, construction spending fell 0.2% in May, the government reported, after rising 2.3% in April. Economists thought it would fall 0.9%.
Housing: The National Association of Realtors said its pending home sales index plunged 30% in May, reflecting the end of the tax rebates for homebuyers. Economists expected the index to fall 10.5%. The index rose 6% in April.
Jobs: One day ahead of the government's big non-farm payrolls report for June, the weekly jobless claims report showed a rise in new claims. The number of Americans filing new claims for unemployment last week rose to 472,000 from a revised 459,000 in the previous week. Economists expected 458,000 new claims.
Continuing claims, a measure of Americans who have been receiving benefits for a week or more, rose to 4,616,000 from a revised 4,573,000 in the previous week. Economists expected a drop to 4,510,000.
Friday's big jobs report is expected to show that employers cut about 100,000 jobs from their payrolls last month. The unemployment rate, generated by a separate survey, is expected to have risen to 9.8% from 9.7%.
A report on private sector hiring released Wednesday showed employers added 13,000 positions in June, missing forecasts for a gain of 61,000.
Autos: Car and truck makers were releasing June sales figures through the session. General Motors said sales rose 36% from a year earlier, but dipped 12.5% from May. That month-over-month decline was bigger than what economists surveyed by Briefing.com were expecting, providing another indication that the economy is weakening.
World markets: European markets stumbled across the board, with Britain's FTSE 100 losing 2.3%, Germany's DAX giving back 1.8% and France's CAC 40 falling 3%.
Asian markets slipped as well, with Japan's Nikkei falling 2%, Hong Kong's Hang Seng down 0.6% and the Shanghai Composite off 1%.
Commodities: U.S. light crude oil for August delivery fell $2.68 to settle at $72.95 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $39.20 to settle at $1,206.70 an ounce.
Bonds: Treasury prices climbed, lowering the yield on the 10-year note to 2.93% from 2.95% late Wednesday. Treasury prices and yields move in opposite directions.
Market breadth: Market breadth was negative. On the New York Stock Exchange, losers beat winners three to two on volume of 1.6 billion shares. On the Nasdaq, decliners topped advancers by two to one on volume of 2.68 billion shares.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.90%||3.85%|
|15 yr fixed||3.07%||3.00%|
|30 yr refi||3.96%||3.92%|
|15 yr refi||3.12%||3.10%|
Today's featured rates:
Google filed a patent for a toy that will have sensors and cameras, and can control connected devices. More
Rents increased 4% in April from last year while home values only rose 3% during the same time period. More