NEW YORK — Dejected investors sent stocks plunging Thursday, hurtling the Dow Jones industrials down more than 340 points after retailers and the government added to a mountain of bad economic news and devastated hopes for a late-year recovery.
The market was already nervous as it waited for the government to release its August employment report today. So news from the nation’s major retailers that shoppers curtailed their spending last month because of higher gas and food prices came as a heavy blow.
Wal-Mart, the world’s largest retailer, beat expectations because of its big discounts, but many teen retailers and luxury chains did poorly, a sign that consumers are spending mostly on essentials and putting discretionary buying on hold.
Meanwhile, the Labor Department said new applications for unemployment insurance rose by 15,000 last week from the previous week. That broadly missed expectations for a fourth straight week of declines, heightening worries that the average American — already feeling the effects of the weak housing market — will have even less means to spend.
Furthermore, if the job market keeps deteriorating, it is tough for Wall Street to see a rebound in sight for the economy’s biggest culprit: the tumbling housing market.
“You have to have a paycheck to pay that mortgage,” said Craig Peckham, market strategist at Jefferies & Co.
The numbers released Thursday followed some upbeat reports over the past month. But investors are not expecting any promising news in the August jobs report, particularly after the ADP National Employment Report said private-sector employment decreased in August by 33,000.
Economists are predicting the government will report the eighth straight monthly payrolls drop and a rise in the unemployment rate.
An economic recovery appears far off to investors — and with the Dow down more than 15 percent for the year so far, they don’t appear to be holding out for a significant upturn in stocks, either.
The Dow fell 344.65, or 2.99 percent, to 11,188.23. It was the worst drop for the blue-chip index since June 26, when it fell more than 358 points, or 3.03 percent. Broader indexes also tumbled. The Standard & Poor’s 500 index fell 38.15, or 2.99 percent, to 1,236.83, and the Nasdaq composite index dropped 74.69, or 3.20 percent, to 2,259.04.
By sector, industrials and materials were leading the way lower, both falling more than 4 percent.
“There’s a big shift between what’s working in the market and what’s not,” said Owen Fitzpatrick, head of U.S. equities at Deutsche Bank. “That last group that had held up so well — multinational industrials and materials — (is) now leading the way down.”
MarketWatch contributed to this report.
