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Market Recap: Dow Suffers Second-Biggest Drop of the Year, Loses 251 Points

Markets were destroyed today:

▼ Dow: -1.96 percent

▼ Nasdaq: -2.44 percent

▼ S&P: -2.23 percent

Precious metals:

▼ Gold: up -2.54 percent to $1,565.00 an ounce

▼ Silver: up -4.18 percent to settle at $26.87

Commodities:

▼ Oil: -3.39 percent

Markets were down because:

Investors yanked money out of stocks Thursday after news of possible Moody’s downgrades and reports from the U.S. and China pointed to a sharp slowdown in manufacturing broke.

The Dow Jones industrial plunged 251 points, the second-biggest drop this year.

Losses in energy and materials companies led a widespread rout on the stock market. The Dow started sinking after 10 a.m., when the Philadelphia branch of the Federal Reserve reported a sharp contraction in manufacturing in the Northeast. The losses accelerated throughout the day.

The bad news kept piling up as the day went on. Mining and other companies that make basic materials fell hard after prices for commodities such as copper and oil dropped. Goldman Sachs analysts advised their clients to bet that stocks would fall, and speculation swirled that Moody's would cut the credit ratings of 17 banks.

A new report that manufacturing slowed in China was troubling since that country's economy has helped drive global economic growth over the past four years. China is a major importer of copper and other basic materials.

The Standard & Poor's 500 index lost 30.18 points to 1,325.51, a decline of 2.2 percent. The Nasdaq composite fell 71.36 points, 2.4 percent, to 2,859.09. All three indexes lost their gains for the week.

The late-morning blows to investor confidence were just the latest reasons for people to pull money of out stocks. Earlier Thursday, the Labor Department reported that the four-week average of applications for unemployment benefits, a figure closely watched by economists, remained stagnant. The National Association of Realtors also reported that sales of previously occupied homes dropped 1.5 percent in May.

All this came a day after the Federal Reserve slashed its estimates for U.S. economic growth and said it would extend a bond-buying program through the end of the year, disappointing investors who had hoped for bolder steps from the central bank to get the economy going again.

A manufacturing survey for countries that use the European currency also showed a contraction. The reports out of China and Europe helped sink commodity prices. Copper and platinum fell 2 percent. Benchmark U.S. crude hit its lowest level in almost nine months, $78.20 a barrel. That's down almost 30 percent from a peak in February.

The Philadelphia Fed index pushed Treasury prices up and yields down as traders shifted money into the their favorite hiding spot. The yield on the 10-year note slipped to 1.61 percent, down from 1.63 percent late Wednesday.

Material and energy companies, whose fortunes are closely tied to economic swings, led all 10 industry groups within the S&P 500 index lower. Just 12 of the 500 companies in the index rose.

Meanwhile in Europe, auditors calculated that Spain's troubled banks need as much as €62 billion ($78.76 billion). A Bank of Spain official said this scenario was much less than the €100 billion that the 17 countries in the euro currency union said they would provide for Spain's banking sector.

The Associated Press contributed to this story.

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