Commodities Market Fall Rout Spurs Selling on Wall Street Index

Commodities fell broadly Thursday, indicating that some speculators were locking in their gains and that other investors were protecting profits because of concerns that Friday's jobs reports may be worse than originally thought.

Wall Street stock indexes fell for a fourth straight day on Thursday as a massive sell-off in commodities spilled over into other markets, forcing investors out of higher-risk assets and rattling equities markets before Friday's U.S. payrolls data. Commodities fall and an unexpected jump in unemployment claims put financial markets on edge Thursday, dragging the stock market lower.

MORE JOBLESS CLAIMS: Stock indexes fell after the Labor Department said that first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months.

THE INDEXES: The Dow Jones industrial average fell 139.41 to close at 12,584.17. The S&P 500 index fell 12.22 points to 1,335.10. The Nasdaq composite fell 13.51 points to 2,814.72.

The CBOE volatility index (.VIX) jumped above its 50-day average before closing up 6.6 percent at 18.20, its highest closing level since March 28. The move signals investors are willing to pay more for protection for their equities exposure.

Adding to a recent spate of poor economic data, weekly applications for unemployment insurance rose to an eight-month high, setting off alarms a day before the April unemployment report.

"It may very well be the case that the commodity price bubble has burst," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany.

Silver prices were set for the deepest weekly decline in nearly 30 years. The iShares Silver Trust exchange-traded fund (SLV.P) tumbled 11.9 percent on its highest volume ever, near 295 million shares. Its 50-day volume average stands below 60 million shares.

The Reuters/Jefferies CRB index (.CRB) that tracks commodity prices fell 4.9 percent and was on track for its biggest weekly fall since late 2008.

The Dow Jones industrial average (.DJI) dropped 139.41 points, or 1.10 percent, to 12,584.17. The Standard & Poor's 500 Index (.SPX) fell 12.22 points, or 0.91 percent, to 1,335.10. The Nasdaq Composite Index (.IXIC) lost 13.51 points, or 0.48 percent, to 2,814.72.

The S&P 500 fell through its 14-day average, but still closed above 1,333 -- a level that could become an important market support, limiting future losses.

About 9.26 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, in a third consecutive trading day with volume above the year's average, indicating investors are selling with conviction.

Declining stocks outnumbered advancing ones by a ratio of about 8-to-5 on both the NYSE and Nasdaq exchanges.

Consumer-related shares also fell but were the best performers as the drop in crude was seen lessening the financial burden on individuals of high gasoline prices.

U.S. retailers earlier warned of rising costs and cautious consumers even as a late Easter boosted sales of clothing and other holiday-related items in April, helping many beat sales expectations.

Ross Stores (ROST.O) gained 6.9 percent to $78.55 after its sales beat forecasts.

An index of airlines (.XAL), a sector sensitive to fluctuations in energy costs, advanced 3.2 percent, its largest daily gain in almost two months.

Helping the Nasdaq, Electronic Arts Inc (ERTS.O) closed at its highest level since August 4 2009, up 8.8 percent at $21.68 a day after posting strong earnings.

Commodities like oil and cotton had risen by more than 25 percent over the past year. Some, like silver, remain up nearly 100 percent over this time last year, despite Thursday's decline.

Thursday's pullback indicated that some speculators were locking in their gains and that other investors were protecting profits because of concerns that Friday's jobs reports may be worse than originally thought, say experts. That could lead to weaker demand from consumers.

Oil prices fell nearly $10, or 9 percent, to close below $100 a barrel for the first time since mid-March. Silver lost 8 percent to settle at $34.41; the metal already had its biggest one-day drop in three decades on Tuesday and is nearly $16 off its high of $50 reached last week. And gold fell 2.3 percent to $1,474.90 an ounce.

"Speculators are unwinding their positions to take a profit," said Peter Fusaro, the chairman of Global Change Associates, an energy trading consultant in New York.

Energy companies fell, mimicking the price of oil. Exxon Mobil, Chevron, and Schlumberger each lost more than 2 percent. The drop in oil prices was a boost to companies like Delta Air Lines, which gained 7 percent.

Stock indexes fell after the Labor Department said that first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months. Forecasters didn't see it coming. Economists had expected claims would drop to 410,000.

The Dow Jones industrial average lost 139.41 points, or 1.1 percent, to 12,584.17. The S&P 500 dropped 12.22, or 0.9 percent, to 1,335.10. The Nasdaq composite fell 13.51, or 0.5 percent, to 2,814.72.

Government bonds rose, pushing long-term interest rates to their lowest levels this year. The yield on the 10-year Treasury note sank to 3.16 percent.

Applications for unemployment benefits have increased in three of the previous four weeks. The jump in claims, along with other signs the economic recovery is losing strength, have raised concerns about what the government's monthly jobs report for April will reveal when it's released on Friday.

Economists forecast that employers added 185,000 workers in April. The unemployment rate is expected to remain unchanged at 8.8 percent.

Meanwhile, gas is nearing $4 per gallon and major packaged goods companies have implemented price increases on every day purchases, leading some analysts to worry that consumers will cut back on spending.

Prior to Wednesday, rising earnings had been driving stocks up in recent weeks. But even strong results reported Thursday by several large companies did not outweigh concerns about the economic recovery.

General Motors Co. was among the companies reporting higher profits Thursday. GM said its earnings more than tripled on stronger sales in the U.S. and China. Despite the results, GM fell 3 percent.

Other companies that reported strong earnings rose. Whole Foods Market Inc. gained 0.4 percent after its quarterly report topped Wall Street's estimates. Estee Lauder Cos. gained 1.2 percent after it said earnings doubled on stronger sales.

Despite losses over the last two days, the broader markets are up ? the S&P, for one, is up 15 percent, not including dividends ? in the year since the "flash crash" led many investors to flee the market.

Friday marks the one-year anniversary of the "flash crash" when the Dow sank nearly 1,000 points in less than a half hour. Some stocks lost a third of their value in four minutes.

The market regained most of its losses by the end of the day, but the wild ride left a mark. Fund managers say the "flash crash" made everyday investors, still wary after the financial crisis, more reluctant to trust their savings to the stock market. They began pulling cash out of mutual funds that invest in stocks and favoring bond funds instead.

A pair of economic reports pushed stocks lower Wednesday. Payroll processor ADP said companies added fewer jobs in April than economists had expected. In a separate report, the Institute for Supply Management said its service sector index rose at the slowest pace in 8 months in April.

Two stocks fell for every one that rose on the New York Stock Exchange Thursday. Consolidated volume came to 4.8 billion shares.