Dow closes to six-year low

Wall Street fell to its lowest finish since October 2002 on Thursday because of worries about the future of banks and mixed economic reports that included increasing unemployment and a surprising surge in inflation.

All three major indexes dropped more than 1 percent, and the Dow Jones Industrial Average fell below a psychological barrier established Nov. 20 of 7552.29, a setback for many investors who hoped that finish would mark the low point of the market’s extended decline from its October 2007 highs.

The Dow plunged 89.68, or 1.2 percent, to 7465.95. The Nasdaq, home to many high-tech companies, fell 25.15, or 1.71 percent, to 1442.82. The broader Standard & Poor’s 500 sank 9.48, or 1.20 percent, to 778.94.

Financials and high-tech stocks led the sell-off, in part because of concerns about what the Treasury Department has in mind in the “stress test” that it seeks to apply to the major banks. CNBC wondered whether nationalization would be in store for banks that don’t pass the test. “Until you get some better outlook for the financials, it will be very tough for the markets,” Alec Young of Standard & Poor’s told CNBC. “It’s hard to make a case for a bottom for the markets” in the absence of information about how the government plans to help the banks out of their crisis.

The price of a barrel of light, sweet crude zoomed upward by more than $4 to close above $39 because oil inventories fell unexpectedly.

In the corporate world, Sprint Nextel Corp., the country’s third largest wireless company, reported a loss of $1.6 billion for the final three months of last year because of a write-off of its 2005 purchase of Nextel Communications Inc. and because it lost 1.3 million customers during the quarter.

But the news was better than expected, and Sprint, based in Overland Park, Kan., predicted it will lose fewer customers this year. It has about 49.3 million subscribers, an 8.7 percent drop from 2007. The firm lost 87 cents a share for the quarter compared with $10.31 a share a year earlier.

CVS Caremark Corp. declared a profit for the fourth quarter, reporting it earned 65 cents a share, up from 55 cents a year earlier, a 17 percent gain for the drugstore chain.