US stocks slumped after weak labour market reports and dour forecasts from Alcoa and Intel gave investors reasons to retreat after the recent rally. The DJIA closed 245 points lower at 8769.70, the S&P500 fell 28.05 points to close at 906.65 and the Nasdaq fell 53.32 points to close at 1599.06. Alcoa's massive job losses and profit warnings from Time Warner and Intel added to the weakness. Tensions in the Middle East and the gas dispute between Russia and Ukraine were also in focus. Plunging oil and gold prices hit energy and metal stocks.
In economic news, a pair of weak job market reports sparked worries ahead of Friday's big government report. Private employers cut 693,000 jobs from their payrolls in December, according to the latest survey from payroll-services firm ADP. That was up from the revised 476,000 jobs lost in November and worse than what economists were expecting.
Planned layoffs at firms slipped 8.4% in December from the previous month but nearly quadrupled from a year ago.
The government releases its December jobs report Friday. Employers are expected to have cut 475,000 jobs from their payrolls after cutting 533,000 jobs in the previous month. The unemployment rate, generated by a separate survey, is expected to have risen to 7% from 6.7% in the previous month.
In other economic news, the nation's budget deficit will likely rise to a record $1.2 trillion, or 8.3% of GDP, in 2009, not including the cost of the Obama economic stimulus plan, the government said Wednesday.
Alcoa said late Tuesday it will cut 15,000 jobs, or 13% of its worldwide workforce, by the end of the year. Alcoa also said it will halve capital spending and sell off four of its businesses as it cuts production in the wake of the global economic slowdown. The stock plunged 10% Wednesday.
Intel posted a second revenue warning. The company said weaker demand for its technology products will cut into its fourth-quarter revenue. Shares fell 6%.
Time Warner warned it will take about $25 billion in writedowns in the fourth quarter, leading it to post a loss. Shares fell over 6% Wednesday.
Monsanto rallied almost 18% after the company reported higher-than-expected fiscal first-quarter earnings and boosted its full-year profit outlook.
Treasury prices fell, raising the yield on the benchmark 10-year note to 2.49% from 2.45% Tuesday.
Lending rates improved. The 3-month Libor rate slipped to 1.40% from 1.41%. That was a 4 1/2-year low. Overnight Libor fell to 0.11% from 0.12%. Libor is a key bank lending rate.
The dollar tumbled versus the euro and yen.
U.S. light crude oil for February delivery slumped $5.78 to settle at $42.80 a barrel on NYMEX. Prices fell after a government report showed a bigger-than-expected surge in crude oil and gasoline stockpiles last week, reflecting the continued drop in demand. Prices have fallen over $100 per barrel in the last six months. Oil prices have risen over the last two weeks as the Israeli air and ground offensive has raged on.
COMEX gold for February delivery fell $24.30 to settle at $841.70 an ounce.
The Nikkei average slid 3.9 percent on Thursday, snapping a seven-day rally, after grim U.S. jobs data and an Intel revenue warning fanned fears the recession was deepening, hitting chip stocks and other exporters.
The benchmark erased most of the gains it has booked so far this year. It had climbed nearly 9 percent in the past seven trading sessions including two half-days of trading before and after the New Year holiday.
Inpex and other resource linked shares sank after oil fell 12 percent to log its largest percentage fall in 7 years. Mitsubishi Motors rose after a newspaper report that the automaker will begin supplying electric cars to PSA Peugeot Citroen Group, while defensive stocks such as household goods maker Kao Corp gained as exporters lost steam. The Nikkei shed 362.82 points to close at 8876.42.
UK stocks closed lower on Wednesday, ending a six day winning streak, as sliding oil and metal prices knocked commodity stocks, with BP also hit by worries about its earnings outlook. The FTSE100 closed 131.41 points lower at 4507.51. BP shares fell by 5.6 percent following rumours the oil major was telling analysts that its fourth quarter earnings would be lower than expected. The company denied the rumours. But the wider sector was also dented as crude prices dipped more than 7 percent after a U.S. government report showed inventories of crude rose much more than expected in the US. Royal Dutch Shell, Tullow Oil, Cairn Energy and BG Group fell between 3.3 and 8.4 percent.
Lower metal prices dragged miners lower with BHP Billiton, Anglo American, Vedanta Resources, Rio Tinto down between 5.8 and 8 percent.
Banks added to the losses, with Standard Chartered, RBS and HSBC sliding between 2.2 and 7.9 percent. Man Group fell 9.4 percent after UBS downgraded the hedge fund manager to "sell" from "buy" and took a cautious stance ahead of a trading statement. 3i was the top performance, gaining 5.9 percent and adding to sharp gains on bargain hunter interest.
The Bank of England began its two-day rate policy meeting and is due to announce its interest rate decision today. The central bank is expected to cut rates by 50 basis points to 1.5 percent. Britain's Chancellor Alistair Darling said the UK was "far from through" the recession and that achieving economic recovery was a long way from completion.
Marks and Spencer climbed 2.2 percent as investors were relieved the company's trading update was not as bad as expected. Marks and Spencer reported its worst quarterly sales performance for a decade and said it would cut around 1,320 jobs to save money in a tough trading environment. Other retail stocks were mixed. Tesco added 1.4 percent while Home Retail Group fell 1.1 percent and Kingfisher and Next lost 5.6 and 2 percent respectively.
Underlining the grim outlook for retailers and the wider economy, data showed that new car sales in Britain fell more than one fifth year-on-year in December to cap the worst year for the industry in more than a decade.