- The Washington Times - Friday, May 22, 2009

Stocks fell sharply Thursday on disappointing jobless claims and Standard & Poor’s warning that Britain could lose its top credit rating - which left investors wondering whether the United States could be next.

The Dow Jones Industrial Average closed at 8,292.13, down 1.5 percent or 129.91 points. The broader Standard & Poor’s 500 Index closed at 888.33, down 1.7 percent or 15.14 points, and the tech-heavy Nasdaq closed at 1,695.25, down 32.59 points.

The Labor Department said the number of first-time unemployment claims decreased last week by 12,000. Unemployed workers filed 631,000 claims in the week ending May 16, compared with the previous week’s revised figure of 643,000.

However, the number of continuing claims increased last week to 6.66 million - a record for the 16th straight week, which set off another round of concerns about the economy not recovering as fast as anticipated.

The numbers, which were near analysts’ predictions, are watched closely because they could translate into reduced consumer spending and higher loan losses.

“The markets have come a long way, but today was a great indication of how vulnerable they still are,” said Brian Lipps, a Charles Schwab & Co. vice president. “The markets have priced in some rosy expectations, and any contradiction comes at an expense.”

Now that most of the major U.S. banks appear to be stable and are raising capital to repay bailout loans and cushion against a prolonged recession, investors are casting a wary eye on the global economy and the country’s struggling housing industry.

Reports over the past weeks show that U.S. housing construction is at a 50-year low.

British stocks fell the most in almost two months after S&P; said Britain’s top-level AAA debt rating is more likely to be cut as the government’s finances deteriorate.

Britain’s FTSE 100 Index plunged 2.8 percent and government bond prices slumped. Shares of HSBC Holdings and Royal Bank of Scotland slid more than 2.4 percent in U.S. trading.

Major stock market indices are still up more than 30 percent since hitting a 12-year low in early March.

Among the most heavily traded stocks Thursday were Bank of America and Regions Financial Corp., two of 10 major U.S. banks told by the federal government they needed to raise more capital.

Bank of America shares closed at $11.41, down 8 cents. Regions shares closed at $4.10, down 79 cents.

Light, sweet crude oil fell 99 cents to $61.05 a barrel on the New York Mercantile Exchange after reaching a six-month high Wednesday.

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