Dow dives on foreign news, jobless report

Weak economic news from China, the United States and Spain combined with a slump in oil companies caused the Dow Jones industrial average Thursday to have its biggest one-day drop since August.

Investors were jarred when China reported a surprise trade deficit. China's exports fell in February as businesses closed for the weeklong Lunar New Year holiday, but imports of higher-priced oil and other goods jumped, widening the country's deficit to $7.3 billion.

Moody's downgraded Spain's debt, reigniting fears about Europe's debt crisis. In the United States, the government reported that new applications for unemployment benefits rose more than expected last week.

The Dow Jones industrial average fell 228.48 points, or 1.9 percent, to close at 11,984.61. McDonald's Corp. was the only stock in the Dow 30 that rose.

The Standard & Poor's 500 index fell 24.91, or 1.9 percent, to 1,295.11. The Dow and S&P 500 are still up 3 percent since the start of the year.

The Nasdaq composite fell 50.70, or 1.8 percent, to 2,701.02.

Thursday's drop in the Dow was the biggest since Aug. 11. The S&P had a larger fall recently, dropping 27.57 points on Feb. 22 as the uprising against Libyan leader Moammar Gadhafi gained strength.

News that forces loyal to Gadhafi were poised to recapture the strategic oil port of Ras Lanouf from opposition forces sent oil down in the morning. Crude bounced higher later in the day after Saudi Arabian police fired at protesters. Crude oil lost $1.68 to settle at $102.70 per barrel, below the high of nearly $107 a barrel it reached Monday.

Stocks fell broadly, but energy companies were hit the hardest. Exxon Mobil Corp., the largest company in the world by market value, fell 3.6 percent. Energy companies fell 3.6 percent, the most of any industry tracked by S&P.

Oil has been surging over the past few weeks because of the spreading protests in North Africa and the Middle East. Investors have been worried that unrest will spread to major oil-producing countries and disrupt the flow of crude.

Quincy Krosby, chief market strategist at Prudential, said the market was shaken by the combination of unexpectedly weak economic news from China, the downgrade of Spain's debt and concerns that protests planned for today in Saudi Arabia could bring instability to the world's largest exporter of oil.

"The tone of the market has clearly changed," Krosby said. " . . . The momentum is slowing."

The government reported before the market opened that new applications for unemployment benefits rose more than expected last week and the trade deficit jumped in January. New unemployment claims rose by 26,000, far more than the 12,000 analyst had expected. Applications fell to nearly a three-year low the previous week.