Jobless claims soar; home sales plunge Reports rattle stock market

The construction site in Dellville, Pa., is quiet and likely to remain so. Yesterday's reports showed the sales of new homes like this one posted the weakest annual result since 1982.

Two glaring signs the U.S. economy is still in a slump sent stocks reeling yesterday.

News that the nation's unemployment claims reached a record high and that new-home sales hit a record low forced the major stock indexes to give back all of Wednesday's gains, and then some.

The Dow Jones industrial average sank 226 points, or 2.7 percent, while other indicators tumbled more than 3 percent.

The U.S. Labor Department reported that the number of Americans claiming unemployment insurance for the week ending Jan. 17 was a seasonally adjusted 4.78 million, the highest on records dating to 1967. That's an increase of 159,000 from the previous week and worse than economists' expectations of 4.65 million.

Meanwhile, a U.S. Commerce Department report said sales of new homes plunged last month to the slowest pace on record and builders posted their worst annual sales results in more than two decades.

New-home sales fell 14.7 percent in December to a seasonally adjusted annual rate of 331,000, from a revised November figure of 388,000, the agency said. The results were far worse than expected. Prices fell by more than 9 percent from a year ago, and builders are hoarding cash to try to make it out of the downturn.

That sent the Dow down to 8,149.01, the Standard & Poor's 500 index fell 28.95 to 845.14, and the Nasdaq composite index dropped 50.50 to 1,507.84.

As a proportion of the U.S. work force, the tally of unemployment benefit recipients is the highest since August, 1983, a Labor Department analyst said.

The total the department released doesn't include about 1.7 million people receiving benefits under an extended unemployment compensation program Congress authorized in the summer. That means the number of recipients is closer to 6.5 million people.

The number of Americans filing new jobless claims rose slightly last week to a seasonally adjusted 588,000, from a revised 585,000 the previous week, also worse than analysts' forecast of 575,000 new claims. The number of initial claims is near the 26-year high.

On new-home sales, the Commerce Department said builders sold 482,000 houses last year, the weakest since 1982. The median price of a new home sold last month was $206,500, a drop of 9.3 percent from a year ago.