Blue chips fell Thursday as a brokerage downgrade of Exxon Mobil Corp. (XOM), a mix of economic data and crude prices near $49 continued to feed investor concerns; gains in semiconductor stocks helped keep the Nasdaq barely in positive territory.

The Dow Jones industrial average (search) ended down 70.28 points, or 0.70 percent, at 10,038.90, its lowest close since Aug. 17. The Standard & Poor's 500 Index (search) fell 5.20 points, or 0.47 percent, at 1,108.36, its lowest finish since Sept. 1. But the technology-heavy Nasdaq Composite Index (search) finished the day up 0.72 of a point, or 0.04 percent, at 1,886.43.

Traders viewed a possible oil loan to refiners from U.S. government reserves as too small to make up for supply disruptions caused by Hurricane Ivan.

"At this point, as crude goes, so goes the market," said Dan McMahon, head of listed trading at CIBC World Markets Inc. "When crude spiked up, the market gave back all its gains and then some."

On the New York Mercantile Exchange, November crude settled up 11 cents at $48.46 a barrel, after rising as high as $49 -- just 40 cents below the $49.40 record set on Aug. 20.

Investors worry about higher energy prices because they can curb consumer spending and corporate profits.

Exxon Mobil Corp. pulled the Dow down as it fell 2.3 percent to $47.76 after Deutsche Bank cut its ratings on the company and the global oil sector. Rival ChevronTexaco Corp. (CVX) slid 1.5 percent to $52.32.

The drop in the market was an extension of Wednesday's losses, said Larry Wachtel, market analyst at Wachovia Securities.

"The price of oil is lower, there was a downgrade, but beyond that there haven't been any major shock waves," he said.

A lower reading of the Conference Board's (search) index of leading economic indicators, the third straight monthly decline, sent a signal to the markets that economic growth has been slowing and would likely taper off through the end of the year.

"When you take a look at the leading economic indicators, it's very clear that the price of oil is having an impact on the economy," said Hugh Johnson, chief investment officer at First Albany Corp. "Just look at the negative earnings statements from some of the most stable companies out there. If the markets are going to move higher, we're going to need some relief on the oil front so that the earnings picture improves."

A government report showed that the number of Americans lining up to claim an initial week of unemployment benefits climbed more than expected last week, primarily because of hurricanes that have battered Florida and put many people out of work.

First-time claims for state unemployment aid increased by 14,000 to 350,000 in the week ended Sept. 18 from a revised 336,000 the prior week, the Labor Department said in its weekly report. Wall Street economists had forecast 340,000 claims.

Gains in semiconductor stocks like Broadcom Corp. (BRCM) and Xilinx Inc. (XLNX) helped keep the Nasdaq afloat. Broadcom rose 2 percent to $28.86 and Xilinx climbed 2 percent to $29.08.

Fannie Mae (FNM) weighed on the Dow, falling 5 percent, or $3.54, to $67.15 after Wachovia Securities downgraded the company to "market perform" from "outperform." On Wednesday U.S. regulators challenged the company's accounting methods.

Drugstore chain Rite Aid Corp. (RAD) fell 4.8 percent, or 18 cents, to $3.58 despite reporting a quarterly profit, after the company repeated its lowered earnings and sales outlook for the fiscal year ending February. Rival CVS Corp. rose 4 percent, or $1.72, to $42.02.

American Airlines parent AMR Corp. (AMR) slid nearly 8 percent, or 68 cents, to $8.06 after several Wall Street analysts cut their forecasts on earnings for the firm and the airline's chief executive said high fuel prices had hurt the world's largest carrier.

Separately, Merrill Lynch said in an analyst's note it has downgraded AirTran , Continental and Delta from "buy" to "neutral" because of problems it sees developing in U.S. East Coast markets. AirTran fell 4 percent to $10.48, Continental slipped 4.5 percent to $9.07 and Delta fell 3.5 percent to $3.57.

Media and merchandising company Martha Stewart Living Omnimedia Inc. (MSO) rose 17 percent, or $2.57, to $17.55 percent on the Nasdaq after it said that Mark Burnett, creator of the hit reality-TV shows "Survivor" and "The Apprentice," will develop a new prime-time television series featuring Martha Stewart. It was the biggest percentage gainer on the NYSE.

Bed Bath & Beyond Inc. (BBBY), the home goods retailer, said analysts' estimates for the third quarter were "reasonable," disappointing some investors who were hoping it would exceed estimates or raise its forecast. Bed Bath & Beyond's stock was down 3 percent, or $1.16, to $38.42.

The tech sector saw another company post a profit warning as Andrew (ANDW) said it would miss its fourth-quarter forecasts due to higher costs and lower demand. The telecommunications system provider nonetheless rose 78 cents to $12.

Trading was moderate, with 1.3 billion shares changing hands on the New York Stock Exchange and about 1.4 billion traded on Nasdaq -- both below their daily averages last year.

The Russell 2000 index of smaller companies was down 0.09, or 0.02 percent, at 565.80.

Overseas, Japan's Nikkei stock average fell 0.6 percent. In Europe, Britain's FTSE 100 closed down 0.5 percent, France's CAC-40 dropped 1.1 percent for the session, and Germany's DAX index slid 0.9 percent in late trading

Reuters and the Associated Press contributed to this report.