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NEW YORK (AP) — Weak economic news from China, the U.S. and Spain combined with a slump in oil companies sent stocks sharply lower Thursday.
Investors were jarred when China reported a surprise trade deficit in February. China's exports fell as businesses closed for the weeklong Lunar New Year holiday, but imports of higher-priced oil and other goods jumped, widening the country's deficit to $7.3 billion.
Meanwhile Moody's downgraded Spain's debt, re-igniting fears about the European debt crisis. The downgrade also sent the dollar higher against the euro.
News that forces loyal to Libyan leader Moammar Gadhafi were poised to recapture the strategic oil port of Ras Lanouf from opposition forces sent oil down nearly 3 percent to $101 a barrel, well below the high of nearly $107 a barrel it reached on Monday.
Stocks fell broadly, but energy companies were hit the hardest. Exxon Mobil Corp., the largest company in the world by market value, fell 2.6 percent. Chevron Corp. fell 2.8 percent.
Oil has been surging over the past few weeks because of the spreading protests in North Africa the Middle East. While Libya produces less than 2 percent of the world's oil supply, investors are worried that unrest will spread to major oil-producing countries like Saudi Arabia and disrupt the flow of crude.
The Dow Jones industrial average fell 160 points, or 1.3 percent, to 12,053. The Dow had been down as many as 224 points earlier, sending it briefly below 12,000.
McDonald's Corp. was the only stock in the Dow 30 that rose. McDonald's was up 1.6 percent after reporting that sales at restaurants open at least a year rose more than expected.
The Standard & Poor's 500 index fell 18, or 1.4 percent, to 1,301. Energy companies fell 3 percent, the most of any industry tracked by S&P. The last time the index closed with a 20-point drop was March 1, when Federal Reserve Chairman Ben Bernanke warned that a sustained increase in crude prices could pose a risk to the recovery.
Only a handful of S&P 500 companies rose. Starbucks Corp. rose 8 percent after cementing a deal with Green Mountain Coffee Roasters Inc. to sell drinks in machines made by Keurig. Netflix Inc. rose 3 percent.
The Nasdaq composite fell 42, or 1.5 percent, to 2,709.
Apart from several sharp swings in the last month, stocks have been rising nearly continuously since last August, when the Federal Reserve said it would take steps to stimulate the economy. Wednesday marked two years since stocks bottomed out at 12-year lows.
Quincy Krosby, chief market strategist at Prudential, said the market was shaken by the combination of unexpectedly weak economic news from China, the downgrade of Spain's debt and concerns that protests planned for Friday in Saudi Arabia could bring instability to the world's biggest oil exporter.
"The tone of the market has clearly changed," Krosby said. "The market trend had been to buy rather than sell and that bad news doesn't matter. The momentum is slowing."
The government reported before the market opened that new applications for unemployment benefits rose more than expected last week and the trade deficit jumped in January.
New unemployment claims rose by 26,000, far more than the 12,000 analyst had expected. Applications fell to nearly a three-year low the previous week.
The U.S. trade deficit increased 15.1 percent to $46.3 billion as higher oil prices caused imports to rise faster than exports. A widening deficit threatens the U.S. economic recovery. When imports outpace exports, more jobs go to overseas workers than to U.S. workers.
Investors moved money into relatively stable investments as stock prices fell. Treasury prices rose, sending the yield on the 10-year note down slightly to 3.45 percent from 3.47 percent late Wednesday. An index measuring the dollar against other currencies rose 0.5 percent.