The market tumbled on this Thursday due to a record one-day loss in the Dow component AIG and a weaker than expected same-store sales report from Wal-mart. At the close, the Dow lost 224 points, erasing two thirds of the gains from the previous two sessions. The Nasdaq fared relatively well with a loss slightly under 1%. The news on the economic front was quite mixed today. On the negative side, the weekly initial jobless claims figure increased to 455K from 448K in the previous week. Economists were looking for a drop to 420K. That figure is the highest in more than six years. The continuing claims also jumped 31K to 3.311 million, the highest in four years. In addition, almost two thirds of chain retailers reported worse-than-expected same-store sales reports for July. It seems that the effects of the rebating check were diminishing faster than some economists had expected. On the positive side, pending home sales increased 5.3% in June vs. a drop of 1% expected. Although the reading reignited some hope in the gloomy housing market, we should note that this number is traditionally volatile from month to month and more information is required before any conclusion can be drawn.

All 10 major sectors were lower for the session. On a relative basis, financials were among the worst performers mainly due to poor performance in AIG and Citi, which would buy back more than $7 billion of illiquid auction-rate securities to settle charges that it misled investors about the debt’s risk. The CRB commodity index rebounded and closed slightly under the 400 level. The US dollar continued its recent strength and gained more grounds against most major currencies. Overnight, both ECB and BOE kept their respective benchmark rates unchanged as widely expected. However, currency traders are betting the next moves in Europe will be lowering rates while in US, the next move could be the opposite. Treasuries rallied sharply partly due to typical flight to quality and partly due to stronger than expected demand for 30-year bonds. The VIX index gained almost 1 point. The market breath was decisively negative on both NYSE and Nasdaq with relatively heavy volume.