Dow tumbles over 280 points
Dow industrials extends losses as investors worry about implications of Citigroup downgrade, Exxon Mobil earnings.
NEW YORK (CNNMoney.com) -- Stocks suffered further losses Thursday afternoon on a Citigroup downgrade and disappointing results from oil giant Exxon Mobil.
The Dow Jones industrial average (Charts) was trading 281 points, or 2.0 percent lower, with 2 hours remaining in the session.
The broader S&P 500 index (Charts) lost 1.9 percent, while the tech-fueled Nasdaq slipped 1.6 percent.
Trading curbs remained active on the New York Stock Exchange after going into effect early in the session to limit the market's downside.
Citi shares tumbled after a CIBC World Market analyst downgraded the company's stock and added that Citigroup may have to cut its dividend in order to raise $30 billion in capital.
News of the downgrade hit Citi stock and sparked fears that the financial sector may have suffered a greater impact from the subprime 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."
Thursday's downgrade marks the latest woe for Citigroup, which has been hit hard by the summer's mortgage crisis. Last month, the company took $3 billion in writedowns due to bad subprime bets and followed that by reporting a 57 percent drop in earnings late.
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 hovered near record highs after hitting a new record of $96.24 a barrel in electronic trading earlier Thursday. Light, sweet crude for December was trading lower by mid-afternoon, falling 67 cents to $93.86 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.
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.
Market breadth was negative. Losers beat winners by 5 to 1 on the New York Stock Exchange on volume of 928 million shares. Decliners topped advancers by nearly 4 to 1 on the Nasdaq as 1.47 billion shares traded hands.
Treasury prices gained, lowering the yield on the benchmark 10-year note to 4.36 percent from 4.47 percent a session earlier. Prices and yields move in opposite directions.
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, which Wednesday topped $800 for second straight session before retreating $3.50 to $791.80.