US STOCKS-Wall St battered by euro-zone fears

* Euro-zone turmoil feeds fear of market correction

* Sears falls after results, but Williams-Sonoma rises

* U.S. weekly initial jobless claims disappoint

* Dow off 2.1 pct, S&P down 2.4 pct, Nasdaq off 2.6 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to late afternoon, changes byline)

By Leah Schnurr

NEW YORK, May 20 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) dropped on
Thursday, driving indexes down more than 2 percent on growing
fears that the euro zone’s handling of its sovereign debt
crisis could jeopardize the global economic recovery.

The S&P 500 is now down more than 10 percent from its
April high, signifying a correction and marking the most
significant break in the rally from March 2009’s 12-year low.
The index is also below its 200-day moving average.

The correction comes on the back of a stream of negative
news out of Europe, from worries over Greece’s debt crisis to
Germany’s unilateral decision this week to ban naked
short-selling.

“This is just investor fear and panic setting in,” said
Mike O’Rourke, chief market strategist at BTIG LLC in New
York.

“One of the problems is the European policy-makers have
done a very poor job handling this whole crisis … and the
poor response has further undermined investor confidence.”

Banks and commodity-related stocks were among the hardest
hit, with the KBW Bank index (.BKX: ) losing 2.7 percent. The
S&P Energy index (.GSPE: ) fell 2.7 percent, while June crude
futures fell 2.7 percent, or $1.86, to settle at $68.01 a
barrel in volatile trade on the day of its expiry.

The Dow Jones industrial average (.DJI: ) fell 223.10
points, or 2.14 percent, to 10,221.27. The Standard & Poor’s
500 Index (.SPX: ) tumbled 26.77 points, or 2.40 percent, to
1,088.28. The Nasdaq Composite Index (.IXIC: ) lost 60.78
points, or 2.64 percent, to 2,237.59.

At these late afternoon trading levels, the indexes had
pared some of their earlier steep losses, when the Nasdaq was
down as much as 4.31 percent at a session low of 2,203.50. The
S&P 500 had hit an intraday low at 1,073.11, a drop of 3.76
percent, while the Dow slid to a session low of 10,087,58,
down 3.42 percent.

Large manufacturers’ shares ranked among the heaviest
weights on the Dow, with Caterpillar (CAT.N: ) down 2.3 percent
at $60 and 3M (MMM.N: ) falling 2.2 percent to $80.74.

May individual equity options and some options on stock
indexes stop trading at Friday’s close and expire on Saturday,
which may increase volatility.

The Chicago Board Options Exchange Volatility index
(.VIX: ), often referred to as Wall Street’s fear gauge, surged
31.3 percent earlier to 46.37, its highest intraday level in
more than a year. But the VIX later retraced some of that gain
and was up 20 percent at 42.38 in late afternoon trading.

Sears Holdings Corp (SHLD.O: ) tumbled 8.7 percent to $90.91
after the company said first-quarter profit (Read more your timing to make a profit.) slipped 38
percent, hit by weaker margins and slightly higher costs.
[ID:nSGE64J0FR]

One rare gainer was the stock of upscale U.S. home-goods
retail store chain Williams-Sonoma Inc (WSM.N: ), which rose 5
percent to $29.87 after reporting an adjusted first-quarter
profit that easily beat expectations. [ID:nN20118101].

Negative data added to the downward momentum with the
number of U.S. workers filing new applications for
unemployment benefits unexpectedly rising last week for the
first time since early April. [ID:nN20125298]

And in more evidence the economy is encountering some
headwinds, the index of leading economic indicators slipped
last month for the first time March 2009, while factory
activity in the U.S. mid-Atlantic region accelerated less than
expected in May.

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(Reporting by Leah Schnurr; Editing by Jan Paschal)

US STOCKS-Wall St battered by euro-zone fears