Wall Street falls sharply

Wall Street fell sharply Thursday on more disappointing economic news - retailers posted sluggish back-to-school sales reports and the government said the number of workers seeking unemployment benefits spiked last week.

Photo: Wall Street falls sharply

Investors, still wary about the overall state of the economy, are feeling uneasy after many of the nation's retailers said shoppers curtailed spending last month due to higher gas and food prices. Wal-Mart Stores Inc., the world's largest retailer, beat Wall Street projections because of its discounts.

Meanwhile, the Labor Department said new applications for unemployment insurance rose by 15,000 from the previous week. That broadly missed expectations for a fourth-straight week of declines.

Crude prices rose as Wall Street waited to see if a weekly U.S. inventory report would contain evidence that slowing economic growth has cut demand. The Energy Department is scheduled to release its report on oil stockpiles for the week ended Aug. 29 later in the session.

A barrel of light sweet crude rose 21 cents to $109.56 a barrel on the New York Mercantile Exchange. It dipped below $108 a barrel on Wednesday.

Stocks came slightly off their lows after a private research group said the U.S. service sector grew unexpectedly in July for the first time in three months as new orders increased and inflation moderated.

The Institute for Supply Management, a trade group of purchasing executives, said Thursday the services sector index rose to 50.6 in August from 49.2 in July. It beat economists' prediction of a reading of 50.0; a reading below 50 signals contraction, while a reading above 50 indicates growth.

In midmorning trading, the Dow Jones industrial average fell 118.95, or 1.03 percent, to 11,413.93.

Broader indexes were also lower. The Standard & Poor's 500 index fell 11.49, or 0.90 percent, to 1,263.49; the Nasdaq composite index dropped 25.33, or 1.09 percent, to 2,308.40.

Bond prices moved higher Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.70 percent late Wednesday.

In corporate news, Wal-Mart said sales of groceries and back-to-school products helped its August same-store sales rise 3 percent, beating expectations. Shares rose 82 cents to $60.61.

Toll Brothers Inc. shares fell 68 cents, or 2.7 percent, to $24.12 after the home builder reporter it swung to a third-quarter loss as sales fell amid the housing slump.

The Russell 2000 index of smaller companies fell 7.77, or 1.05 percent, to 734.14.

Declining issues outpaced advancers by a 3 to 1 basis on the New York Stock Exchange, where volume came to 101.7 million shares.