NEW YORK – Stocks fell sharply in extremely volatile trading Thursday as edgy investors fled the markets after news that a lethal bomb blasts had struck Madrid and that the Al Qaeda terrorist group had claimed responsibility.
The Dow Jones industrial average (search) closed down 168.51 points, or 1.64 percent, at 10,128.38, while the Nasdaq Composite Index (search) ended down 20.26 points, or 1.03 percent, at 1,943.89. It was Nasdaq's lowest close since mid-December. The Standard & Poor's 500 Index (search) closed off 17.10 points, or 1.52 percent.
So far this week, the Dow has lost 467.17 points, giving the index its worst four-day point performance since early October 2002, when it slid 515.95. The Dow also suffered its biggest two-day drop since Friday, Jan. 24-Monday, Jan. 27, 2003, when it fell 379.91, or 4.54 percent
Thursday's trading left the three indexes at their lowest point since mid-December.
The Spanish government initially blamed Basque separatists for the worst terrorist strike in the nation's history. But police later found a van with detonators and an audiotape of Quranic verses near the site, and a London-based Arabic newspaper said it had received a claim of responsibility in the name of Al Qaeda (search). The late-day development caused markets to shudder.
"This has been quite a day," said Michael J. Cuggino, president and manager of the Permanent Portfolio Fund. "This is why you need to be exposed to a lot of different asset classes that can protect you from the different scenarios that come up in a volatile global political climate."
The possible link between Al Qaeda and the bombings in Spain reawakened fears of terrorism on Wall Street that have largely been dormant for months. The attacks jolted investors who had already been selling for three weeks amid uncertainty about the job market and the strength of the economic recovery.
It was still unclear who was responsible for the massive attack in Spain, in which 10 bombs along a rail line killed 190 people and injured 1,200 others at the height of rush hours. With the country's general election just days away, Spanish officials initially blamed the Basque separatist group ETA, but the evidence found in the truck and the claim reported in London made the situation more murky.
Beyond the terrorism concerns, the market's own dynamics were causing concern among analysts. Usually solid performers were lagging the tech-heavy Nasdaq, the most temperamental gauge in recent months.
Before worries about security heightened, markets had drawn brief support from reassuring remarks by Federal Reserve Chairman Alan Greenspan (search) on the U.S. job outlook.
"Greenspan made some comments that were somewhat positive about job growth," Bob Harrington, managing director, head of cash trading at UBS Warburg, said. "His comments didn't hurt the market, but I don't know how much it helped."
Greenspan said he was "fairly well convinced" that hiring by employers will improve soon if current economic growth rates continued.
Meanwhile, the Commerce Department (search) reported a 0.6 percent rise in sales at the nation's retailers in February, matching economists' expectations. The gains were led by a 2.7 percent jump in auto sales; but excluding that component, sales at all other retailers were flat.
Separately, the Labor Department (search) reported new claims for unemployment benefits dropped last week by a seasonally adjusted 6,000 to 341,000, beating forecasts that the number would hold steady. Although the pace of layoffs is slowing, companies don't seem to be in a hurry to hire new workers, which has concerned economists. If the lackluster trend continues, consumers may become more cautious.
National Semiconductor (NSM) was up 88 cents at $39.08 after posting quarterly profits that beat expectations on strong sales in the personal computing and wireless markets. The news offered some short-term support for tech shares; computer maker Dell Inc. was up 74 cents at $32.38, but chip-maker Texas Instruments was down 48 cents at $29.20 after an earlier rise.
The market gyrations prompted investors to seek safer positions, and some of the more economically sensitive basic materials stocks that saw the steepest losses in the previous session rebounded. Transport stocks were another pocket of strength.
Yellow Roadway Corp. (YELL) gained $2.84, or 9.5 percent, to $32.61, after the shipper said its first-quarter earnings were likely to come in at the upper end of previous forecasts.
Target Corp. e(TGT) merged as one of the day's biggest winners, advancing $2.97, or 7.1 percent, to $44.70, after saying it was considering selling its Mervyn's and Marshall Field's divisions. Several brokerage analysts issued upgrades on the news.
Aluminum producer Alcoa Inc. (AA) added 7 cents to $34.27 — the only stock in the Dow 30 to end the day in positive territory.
Volume was heavy, with about 1.89 billion shares changing hands on the New York Stock Exchange. Roughly 2.18 billion shares traded on the Nasdaq. Decliners trounced advancers by 8 to 3 on the NYSE and by 23 to 9 on the Nasdaq.
The Russell 2000 index, which tracks smaller company stocks, was down 6.27, or 1.1 percent, at 568.74.
Overseas, Japan's Nikkei stock average finished 1.2 percent lower Thursday. There were broad declines in Europe following the attacks in Spain; France's CAC-40 lost 2.97 percent, Britain's FTSE 100 closed down 2.2 percent and Germany's DAX index sank 3.5 percent.
Reuters and the Associated Press contributed to this report.