Wall Street extended its 2008 plunge Thursday, tumbling after a regional Federal Reserve report showed a sharp decline in manufacturing...

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NEW YORK — Wall Street extended its 2008 plunge Thursday, tumbling after a regional Federal Reserve report showed a sharp decline in manufacturing activity and as investors feared that downgrades of key bond insurers could trigger further trouble with souring debt.

The Dow Jones industrial average, which had been up more than 50 points early in the session, fell 306.95, or 2.5 percent, to 12,159.21.

Microsoft, one of the 30 Dow stocks, slipped 12 cents to close at $33.11 a share. Boeing, also a Dow stock, fell 35 cents to $79.52.

The Standard & Poor’s 500 index fell 39.95, or 2.9 percent, to 1,333.25, and the Nasdaq composite index declined 47.69, or 2 percent, to 2,346.90.

The Dow is now off 8.3 percent for the year; there have been just 12 trading days so far in 2008, but the index’s frequent triple-digit losses have now forced it to give back its 2007 gains.

The Chicago Board Options Exchange’s volatility index, known as the VIX, and often referred to as the “fear index,” jumped nearly 17 percent Thursday.

Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 when economists were expecting a negative 1.5 reading. The latest number underscored the seriousness of the economic worries in recent weeks.

Investor fears of a slowing economy again dominated trading.

“The Philadelphia Fed just announced dreadful numbers,” said John O’Donoghue, co-head of equities at Cowen. He said if you look back at Philadelphia Fed data for similar numbers, it takes you back to the 2001 to 2002 recession.