Stocks swooned on Wednesday as reports that OPEC would cut oil production raised fears that higher oil prices could curb consumer spending and raise the cost of doing business for U.S. corporations.
The Dow Jones industrial average lost 150.53 points, or 1.57% to 9,425.51. The broader Standard & Poor's 500 index slid 19.66 points, or 1.91%, to 1,009.38. The Nasdaq composite fell 58.03 points, or 3.05%, to 1,843.69.
On Thursday, traders will have a raft of economic data to turn to for direction, with estimates suggesting a mixed picture of the economic recovery. Economic research outfit MMS International expects new home sales to dip 1.3% in August as activity moderates further from the recent brisk pace set in June. Existing homes sales are forecast to slip 2.0%.
In durable good orders, MMS sees a 0.5% rise in both durable orders and shipments for August after strong gains in June and July. Initial jobless claims, meanwhile, are expected to rise for the week ended September 20.
A few companies are expected to report earnings on Thursday. They include manufacturing services company Solectron (SLR) and greeting card company American Greetings (AM).
In commodities news on Wednesday, oil futures were higher on press reports that OPEC, in a surprise move, agreed to cut production by 900,000 barrels a day.
Exxon Mobil (XOM), a Dow component, benefitted from the boost in the crude market along with other oil majors.
The commodities news overshadowed news that Internet gear maker Cisco (CSCO) planned to buy back $7 billion more of its stock, boosting the total authorized by its directors to $20 billion.
In other equities news, entertainment conglomerate Viacom (VIA), the name behind CBS, MTV, and Nickelodeon, lowered its earnings and revenue forecasts for the year, blaming a slower local advertising market.
On the plus side, Paychex (PAYX), the No. 2 payroll services company, posted higher quarterly earnings rose thanks to acquisitions.
Children's book publisher Scholastic (SCHL), reported a narrower first-quarter loss, crediting record sales of the newest Harry Potter book.
And spice maker McCormick & Co. (MKC) said quarterly profit rose 46% as acquisitions and consumer business offset higher benefits costs.
Treasuries rallied on Wednesday thanks to the pullback in equities and the strong results from Wednesday's 2-year note auction. Dollar stability has also helped after recent volatility called into question foreign appetite for U.S. assets, MMS says.
St. Louis Fed President William Poole says that he is optimistic on the U.S. economy, which has "superb" long-term prospects, according to economic research firm MMS. He avoided directly responding to the question of market reaction to the G7 communique on currency flexibility, other than to suggest that the bond market will follow U.S. economic prospects rather than Asian capital flows.
European stock markets ended mixed.
London's Financial Times-Stock Exchange 100 index added 14.70 points, or 0.35%, to 4,236.40 with BP, Shell leading way on ws that OPEC, in a surprise move, will cut output 900,000 barrels a day in the fourth quarter.
In Paris, the CAC 40 was off 2.26 points, or 0.07%, to 3,263.78 with Vivendi International higher as it said its second quarter loss narrowed. Cegetel SA is also higher after reporting its second quarter operating profit rose 34%.
Germany's DAX index fell 103.68 points, or 3.04%, at 3,307.34 on a report that machinery orders were a bit higher and inflation a bit lower. But the German economy is still struggling.
In Asia, Japan's Nikkei 225 index closed up 27.19 points, or 0.26%, at 10,502.29. In Hong Kong, the Hang Seng index gained 351.53 points, or 3.21%, to finish at 11,295.89.