Stocks, Dollar Slide On Poor U.S. GDP, Jobs Data

On the month, the Dow was up 0.3 percent, while the Nasdaq finished July up 1.4 percent. The S&P was down 1 percent in July.

Global stocks and the dollar slid as investors shifted funds to safer government debt on Thursday after disappointing data on U.S. jobs and economic growth revived worries about the health of America's economy.

Oil fell 2 percent as the surprise jump in U.S. weekly jobless claims and weaker than expected second-quarter gross domestic product pressured crude prices.

U.S. stocks accelerated their decline late in the session, pulling down the Nasdaq, which had traded higher for most of the day after Bristol-Myers Squibb Co offered to buy out biotech partner ImClone Systems Inc at a premium.

Investors were concerned that it took the help of massive government rebate checks to keep the U.S. economy growing even at a modest 1.9 percent in the second quarter. The surprisingly weak gain was not enough to dispel Wall Street fears of rising recession risks.

The markets were particularly unsettled over revised data from the Commerce Department that showed U.S. output shrank in last year's final quarter. It only advanced slightly then at the start of 2008.

"Investors are on edge," said Alan Lancz, president of Alan B. Lancz & Associates Inc., an investment advisory firm, based in Toledo, Ohio. "This morning's economic numbers were disappointing. Unemployment is a concern. The economy is still growing but it's definitely slow growth."

Further undermining confidence, the U.S. Labor Department said jobless claims surged to 448,000 last week from a revised 404,000 in the prior week. Readings that are above 400,000 in the past have proven to be a sign that a recession is on hand, especially if that rate of jobless claims is sustained.

Investors pummeled shares of big manufacturers, including Caterpillar, which fell 3.5 percent and Boeing, down 4.3 percent.

"The trend is definitely negative for the labor market," said Steve Point, lead portfolio manager at Glenmede Investment Management in Philadelphia. "This could have a great impact on consumer spending."

However, business activity data from Chicago NAPM, the Institute for Supply Management-Milwaukee, and Kansas City Federal Reserve showed surprising regional growth in July.

Energy shares weighed on the Dow after Exxon Mobil's quarterly earnings missed forecasts and the price of oil fell. Exxon Mobil's shares slid 4.9 percent to $80.43.

The Dow Jones industrial average <.DJI> was down 205.67 points, or 1.78 percent, at 11,378.02. The Standard & Poor's 500 Index <.SPX> was down 16.87 points, or 1.31 percent, at 1,267.39. The Nasdaq Composite Index <.IXIC> was down 4.17 points, or 0.18 percent, at 2,325.55.

On the month, the Dow was up 0.3 percent, while the Nasdaq finished July up 1.4 percent. The S&P was down 1 percent in July.

European shares closed flat in a volatile session following the U.S. economic data and a flurry of mixed earnings results in Europe.

The FTSEurofirst 300 index <.FETU3> of top European shares closed 0.1 percent lower at 1,180.04 points.

British lender HBOS

surprising investors with better-than-expected first-half results.

But food producers were the biggest drag after Unilever delivered second-quarter earnings which some analysts described as "poor quality."

The stock plummeted 8.1 percent in London, dragging peers Danone and Nestle , which fell 2.2 percent and 0.9 percent, respectively.

U.S. and euro zone government bonds rose, buoyed by the U.S. economic data showing a slower pace of growth while euro zone inflation data hit a new record high, was no worse than expected.

The benchmark 10-year Treasury note's price, which moves inversely to its yield, was up 26/32 for a yield of 3.95 percent, the lowest in almost two weeks and down from 4.05 percent late on Wednesday.

The euro surged to a session high of $1.5700, according to Reuters data, adding to overnight gains sparked by a jump in euro zone inflation to a record high in July. It last traded at $1.5598 , up 0.1 percent on the day.

The dollar slid 0.2 percent against the yen to 107.85 yen after falling as low as 107.58 yen.

Oil prices fell on the signs of economic weakness.

"Declining levels of demand are still in the forefront of the market," said Gene McGillian, analyst at Tradition Energy.

U.S. crude traded down $2.69 to settle at $124.08 a barrel, erasing most of Wednesday's $4.58 jump. London Brent crude gave up $3.13 to $123.98 a barrel.

Gold ended higher as the dollar slipped on the jobs data, but oil weakness crimped bullion's gains.

Gold last traded at $913.45/914.65 in New York.

Most Asian stock markets rose after a move by central banks to boost liquidity in financial markets offset a $4 rebound in oil prices,

Tokyo's Nikkei average <.N225> edged up 0.1 percent, and MSCI's measure of Asia Pacific stocks excluding Japan <.MIAPJ0000PUS> up 0.5 percent.