Stocks submarined by Citi, Exxon
Major gauges move off lows, but Citigroup downgrade and Exxon Mobil results keep stocks under pressure.
NEW YORK (CNNMoney.com) -- Stocks remained sharply lower Thursday as a Citigroup downgrade reignited credit market concerns while disappointing Exxon Mobil added to investor fears.
The Dow Jones industrial average (Charts) fell by as much as 258 points but was trading 218 points, or 1.6 percent lower, two hours into the session.
The broader S&P 500 index (Charts) lost nearly 1.7 percent, while the tech-fueled Nasdaq slipped 1.3 percent.
Trading curbs, which prevent a massive selloff in the market, remained active on the New York Stock Exchange after going into effect just after the market opened.
Leading the 30-stock Dow index lower was an analyst downgrade of Citigroup (Charts, Fortune 500) issued Wednesday. The analyst added that the company may have to cut its dividend in order to raise $30 billion in capital.
That news sent Citigroup shares more than 6 percent lower and sparked fears that the financial sector may have suffered a bigger-than-expected hit from the subprime mortgage crisis than originally anticipated.
"I really think that's at the heart of the market going down today," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
"If they were to cut the dividend, the [subprime] problems are much, much deeper than anyone imagined thus far."
Also pressuring stock were disappointing results from oil major Exxon Mobil (Charts, Fortune 500), which reported a bigger-than-expected drop in quarterly earnings, driving down its shares by 2.6 percent.
The news came as sky-high oil prices hit a new record of $96.24 a barrel in electronic trading. Crude prices later turned lower, falling $2.34 to $92.19 a barrel on the New York Mercantile Exchange.
On Wednesday, stocks jumped after the Federal Reserve delivered the quarter percentage point rate cut that Wall Street was hoping for and lowered its key lending rate to 4.5 percent.
With the Fed decision behind them, investors shifted their attention to a host of economic reports delivered Thursday.
The government reported that personal income and spending by individuals rose less than expected in September, while personal income rose in line with expectations.
The report also included a key inflation measure, known as the core PCE deflator, which measures prices paid by consumers for items other than food and energy. It showed a 1.8 percent increase, within the Fed's comfort level.
Manufacturing in the United States grew less than expected during the month of October, the Institute for Supply Management reported, suggesting that woes in the housing market could be spreading to the broader economy.
Initial jobs claims came in at 327,000, a bit less than forecasts and the previous week's reading.
Despite the flood of economic news, investors are still closely focused on Friday's monthly employment report for October. Both economists and Wall Street will be closely watching for signs whether this summer's mortgage crisis has spilled over to the broader economy.
U.S. automakers are due to report October sales Thursday. Analysts are looking to see if General Motors (Charts, Fortune 500) can again post improved sales compared to a year earlier, as it did in September when it gained ground on both domestic rivals, such as Ford Motor (Charts, Fortune 500), as well as some Asian competitors, such as Toyota Motor Corp. (Charts)
In related news, Chrysler LLC said will cut up to 12,000 jobs, or 15 percent of its payroll, as part of a cost-cutting effort.
Treasury prices gained, lowering the yield on the benchmark 10-year note to 4.37 percent from 4.47 percent a session earlier.
The dollar, which hit yet another record low against the euro Wednesday after the Fed rate cut, recovered slightly on the European currency but was lower versus the yen.
Gold prices were lower, which Wednesday topped $800 for the second straight session before retreating $3.40 to $791.90.