NEW YORK — Stocks plunged Thursday, with the Standard & Poor's 500 Index losing the most in 13 months, after jobless claims increased and concern grew that Europe's debt crisis is spreading.
The S&P 500 slid 3.9 percent to 1,071.59, closing below its 200-day average for the first time since July 2009. It was the benchmark's biggest drop since April 2009. The Dow lost 376.36 points, or 3.6 percent, to 10,068.01. The NASDAQ Composite Index joined the S&P 500 and Dow in erasing its gains for 2010, declining 4.1 percent to 2,204.01.
"There are a lot of well-known negatives or obstacles to a speedy recovery, specifically in the U.S. economy and even the developed markets around the world," said Charles Stamey at Manning & Napier Advisors in St. Petersburg, Fla. "Earlier this year, everyone was assuming that the modest economic improvements were going to continue. It's almost as if the market overshot itself."
The S&P 500 has now fallen 12 percent from its 2010 high on April 23 of 1,217.28. All 30 Dow stocks were down more than 2.2 percent, while all but three of the S&P 500 companies declined. The ratio of securities that advanced to those that declined on the New York Stock Exchange and NASDAQ Stock Market reached its lowest level since at least July 2004, according to data compiled by Bloomberg. About 20 stocks fell for each that rose on those exchanges.
Stocks' decline accelerated after the S&P 500 fell beneath its average for the last 200 days. Technical analysts have also said a level of about 1,100 represents a point at which selling may worsen for both the S&P 500 and the June contract, Mary Ann Bartels, head of U.S. technical analysis at Bank of America Corp.' s Merrill Lynch unit, said in a note.
"This is not a typical retracement," Mohamed El-Erian, CEO of Pacific Investment Management Co., which runs the world's biggest bond fund, said in an e-mail. "We are in uncharted waters on account of several issues, including what is going on in Europe and other important structural regime changes. In economic terms, European developments are unambiguously bad for global growth."
The euro fell as much as 1 percent to $1.2297, and in the morning was near the four-year low it reached Wednesday before paring the losses. It rose 0.8 percent to $1.2513 at 4 p.m. in New York.
"The last 30 minutes of the day were highlighted by analyst after analyst calling for being in cash," said Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston. "This market is trading 95 percent on fear and 5 percent on fundamentals. What we also saw was the last few pockets of year-to-date gains see profit-taking. That moved all 30 Dow stocks negative."
Stocks dropped after Labor Department figures showed that initial jobless claims rose by 25,000 to 471,000 in the week ended May 15, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level in a month. The number of people receiving unemployment insurance and those getting extended payments dropped.
Stocks extended their declines after the Conference Board's measure of the economy's outlook for the next three to six months fell 0.1 percent last month. The median forecast in a Bloomberg survey of economists was for a 0.2 percent gain.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 29 percent, or 10.25 points, to 45.57. That level is nearly triple the 2010 low of 15.58 on April 12 for the benchmark U.S. stock-options index.
Exxon, the world's largest oil company, dropped 3.4 percent to $60.33, while ConocoPhillips, the third-biggest U.S. energy company, lost 4.4 percent to $51.04. Crude oil for June delivery fell 2.3 percent to $68.28 in New York after fallinging below $65 earlier in the session.
Spectra Energy Corp., the third-largest U.S. pipeline operator by market value, slumped the second-most in the S&P 500 after Jefferies & Co. cut the stock to "underperform" from "hold." The shares fell 8.2 percent to $19.37.
All 10 S&P 500 industry groups each lost at least 2.7 percent. Materials producers slid 4.4 percent as gold, aluminum, copper, lead and nickel all declined.