The Dow Jones industrial average dropped 419 points to close at at 10,990.58. It recovered slightly from this morning's plummet of 500 points, as stocks fell around the world on fear of more economic weakness.
The other major market indexes were down at least 4 percent. The Nasdaq lost 131 points, or 5.22 percent to close at 2,380.43. The S&P 500 dropped 53 points, or 4.46 percent, to close at 1,140.68.
The U.S. government said more people filed for unemployment benefits last week than were expected, and said there are signs of rising inflation because consumers paid more last month for gas, food and clothes.
Last week, 408,000 people applied for unemployment benefits - an increase from 399,999 the week prior, and the highest level in four weeks.
Investors also worried about debt problems in Europe, where bank stocks fell over concerns about access to funds.
The worldwide plunge marked a return to market volatility that sent markets tumbling since July 21 after appearing relatively stable this week.
Stocks plunged after Standards & Poor downgraded the U.S. credit rating on August 5 despite the government's success at beating the default deadline. It cut the rating from a top AAA rating to AA+.
With the Associated Press
