Stocks belted by British downgrade

NEW YORK(CNNMoney.com) – Stocks fell sharply Thursday as investors responded to mixed economic news and Standard & Poor’s downgraded its credit outlook for the United Kingdom.
The Dow Jones industrial average (INDU) and the S&P 500 (SPX) index were both down nearly 2% about 1-1/2 hours into the session. The Nasdaq composite (COMP) fell 2.1%.
„The downgrade of Great Britain by S&P certainly damped enthusiasm,“ said Peter Cardillo, chief market economist at Avalon Partners.
S&P said it lowered its outlook for the U.K. to „negative“ from „stable.“ The ratings agency said its revision was based on the possibility that the country’s debt burden could reach 100% of its gross domestic product, despite the U.K. government’s „further fiscal tightening.“
Investors also took in fresh readings on the U.S. job market, manufacturing activity and leading economic indicators.
„Today’s numbers didn’t look all that bad,“ said Phil Orlando, chief equity market strategist at Federated Investors. „We continue to get reports that suggest economy is improving.“
Stocks finished Wednesday’s session lower after the Federal Reserve issued a gloomy forecast for the economy.
Economy: The Labor Department reported that initial jobless claims declined by 12,000 in the week ending May 16.
The number of people filing for first-time jobless benefits totaled 631,000 last week, slightly more than expected. But those filing claims on an ongoing basis rose to 6.6 million, an all-time high.
Separately, the Conference Board’s reading of leading economic indicators, which predicts economic conditions six to nine months in the future, rose 1% in April – slightly better than the 0.8% analysts’ expected.
The Federal Reserve Bank of Philadelphia said its index of manufacturing activity in the mid-Atlantic region improved to negative 22.6 in May from negative 24.4 in April. Economists surveyed by Briefing.com had expected the index to improve to negative 18.
World markets: Investors around the world were in a downbeat mood. In Asia, most shares finished lower. European stocks tumbled in morning trading, following S&P’s downgrade of the U.K. market.

Companies: Auto finance firm GMAC is poised to receive a second bailout from the Treasury, according to the Detroit News. The newspaper said the company is due to receive $7.5 billion more in aid.
In one of the first Nasdaq initial public offerings of the year, OpenTable, which operates a restaurant reservation system, raised $60 million, one of the deal’s underwriters told Reuters. The company priced its shares at $20 each, which was higher than expected, and rose 36% to $27.20 in morning trading.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.17% from 3.19% Wednesday. Treasury prices and yields move in opposite directions.
Other markets: Oil slipped from its Wednesday high, but still continued to trade above $60 a barrel. The price of oil dropped $1.95 a barrel to $60.09
In currency trading, the dollar rose versus major international currencies, including the euro, the yen and the British pound.
COMEX gold for June delivery rose $2.20 to $939.60 an ounce.