Wall Street sinks as economic woe escalates

NEW YORK (Reuters) - Stocks fell on Thursday, stalling a four-day run-up in the S&P and the Nasdaq, as investors worried about a sharply worsening economy, sending shares of bellwethers, including Boeing , tumbling.

Insurer Allstate plunged 21 percent after it posted a $1.1 billion quarterly loss. Boeing , down more than 6 percent, was the biggest drag on the Dow a day after the jet plane maker posted a disappointing outlook and announced an order cancellation.

Even as the Obama administration pushes ahead with plans to jolt the economy out of recession, investors were hit by a fresh dose of bleak economic news and corporate earnings.

Government reports showed the amount of people filing for unemployment benefits hit a record in mid-January, while orders for durable goods dropped for the fifth straight month in December and new home sales fell to a record low.

"The data still generally doesn't show signs of things improving here," said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

"More than a year into this recession, we are now starting to see mortgage rates that become attractive to people. But on the other hand, everybody is more uncertain about their jobs and the confidence just isn't there."

The Dow Jones industrial average <.DJI> slid 206.05 points, or 2.46 percent, to 8,169.40. The Standard & Poor's 500 Index <.SPX> shed 25.87 points, or 2.96 percent, to 848.22. The Nasdaq Composite Index <.IXIC> declined 47.62 points, or 3.06 percent, to 1,510.72.

Of the Dow's 30 components, all were in the red except 3M , up 2.7 percent at $56.94 on hopes the diversified manufacturer is well-positioned for growth in late 2009.

Boeing's stock lost 6.2 percent to $40.55 and ranked as the heaviest weight on the Dow industrials.

Allstate tumbled 21 percent to $23.42 and contributed to a 5.7 percent drop in the S&P financial index <.GSPF>.

The energy sector was another big drag in the Dow, as Exxon Mobil shares shed 2.8 percent to $77.03 after Goldman Sachs removed the company from its Americas Buy list, saying it currently saw better investment opportunities among energy companies.

Among home builders, shares of Hovnanian Enterprises slid more than 8 percent to $1.75 and Toll Brothers fell 7.5 percent to $17.86. The Dow Jones home construction index <.DJUSHB> tumbled 7.7 percent after sales of new homes fell in December to the lowest annual pace since the Commerce Department started keeping records in 1963.

Tool and home appliance maker Black & Decker Corp posted a better-than-expected quarterly profit, but warned it sees a very weak 2009, and its stock slid 16.5 percent to $32.36.

Stocks' inability to sustain their recent rally marks a major hurdle in the market's attempt to reverse its year-to-date losses, with the benchmark S&P 500 index down more than 5 percent.

Worries that President Barack Obama's $825 billion economic stimulus package could still face a bumpy road also weighed on sentiment after the U.S. House of Representatives passed it late on Wednesday although every Republican who voted opposed it.

The Senate begins debate next week.

Ford Motor Co shares dropped 2.5 percent to $1.98 after reporting a deeper-than-expected loss, but the ailing automaker said it would have enough cash to go ahead without government loans.

Qualcomm Inc was the biggest drag on Nasdaq after it cut its full-year revenue target on weak demand for cell- phone chips. Its stock fell 6.1 percent to $34.57.

(Additional reporting by Ellis Mnyandu; Editing by Jan Paschal)