A pair of negative economic reports and uncertainty over action in the U.S.House of Representatives on the financial rescue package passed by the Senate Wednesday night combined to send the major stock market indices down 3.2% to 4.5% Thursday.
At market close, the Dow Jones Industrial Average was off 3.22%, or 348.62 points; the S&P was off 4.03%, or 46.8 points; and the Nasdaq was off 4.48%, or 92.68 points. Builder stocks were off across the board, with most drops ranging from 2% to 11%. The Dow Jones Transportation Average was heading for a near record loss as traders took down earnings estimates on trucking and railroad companies in anticipation of declining goods shipments in a crumbling economy.
The culprits were a report from the Labor Department that initial jobless claims jumped to a 7-year high last week, signaling further deterioration in an already anemic employment situation.That was followed by the Commerce Department's report that new orders for manufactured goods in August decreased 4% to $444.4 billion, the largest percentage decrease since October 2006.
The unease on Wall Street was exacerbated by uncertainty over a House vote on the financial rescue bill passed by the Senate Wednesday. It was unclear at midday whether there were enough votes in the House to pass the bill. Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, when asked whether there were enough votes to pass the bill, told CNBC, "I think so." He also said that a failure to pass the bill would "be very bad for the economy...I don't know what the consequences would be."
On the housing front, Freddie Mac reported that rates on 30-year fixed-rate mortgages rose this week to an average of 6.10%, the third consecutive week of increases.
A national consumer survey conducted by the real estate search company Trulia, also released Thursday morning, reported that more than 70% of non-homeowners said they had no plans to purchase a home in the next year.Conversely, only 12% said they expect to buy a home in the next year.
The survey also said that 44% of respondents in the 18-34 year-old demographic, considered the prime segment for first-time home buyers, said they do not want to own a home because it is "too cost prohibitive."