NEW YORK Wall Street sank Thursday, after weak readings on economic growth and the job market touched off renewed concerns about the financial health of businesses and consumers. The Dow Jones industrial average fell more than 200 points.
The Commerce Department's report that gross domestic product grew at a 1.9 percent pace in the second quarter disappointed investors. Economists polled by Thomson Financial/IFR had expected growth of 2.4 percent in the broad measure of the economy's health.
Investors were also concerned about Labor Department data saying that the number of people seeking jobless benefits jumped to the highest level in five years. Economists warned the weekly figures can be volatile, however, and some dismissed them as an aberration.
A $4.5 billion cash offer from Bristol-Myers Squibb Co. for its cancer drug partner ImClone Systems Inc. kept the Nasdaq composite index from falling as sharply as other indexes. In other positive news, oil prices declined, and an index of Midwestern business activity indicated growth.
But Wall Street could not shake off its worries about the economy particularly after sobering remarks from Former Federal Reserve Chairman Alan Greenspan on CNBC late in the afternoon. Greenspan said he would be more surprised if the United States did not enter recession than if it did.
The comments came after Treasury Secretary Henry Paulson said in a speech in Washington that the economy will continue to grow at a moderate pace for the rest of the year, and the government's $168 billion stimulus package had helped grease the economy's wheels.
But Larry Smith, chief investment officer at Third Wave Global Investors in Greenwich, Conn., said tightness in credit markets and high oil prices continue to weigh on the economy and the stimulus package won't deliver a permanent fix.
"Tax rebates have been a very effective way of propping up the economy in the second quarter, and less so in the third quarter," Smith said. "To fix the economic growth problems, you have to restore liquidity to the system."
According to preliminary calculations, the Dow Jones industrial average fell 205.67, or 1.78 percent, to 11,378.02, continuing its string of erratic, triple-digit daily swings.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 16.88, or 1.31 percent, to 1,267.38, while the Nasdaq fell 4.17, or 0.18 percent, to 2,325.55.