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Dow tumbles below 12,000 on Saudi unrest and global economic fears

Stocks plunged Thursday, hit first by new worries about global growth and then by reports that Saudi Arabian police had fired on protesters.

After three weeks of largely shaking off the unrest in the Middle East and North Africa, more investors headed for the exits.

The Dow Jones industrial average slumped 228.48 points, or 1.9%, to 11,984.61, its first close below the 12,000 level since Jan. 31.

The broader market also plunged as trading volume jumped from recent low levels. Some investors poured into the classic haven, U.S. Treasury bonds, driving interest rates down sharply.

Qatif World markets were slammed early Thursday by news of slowing Chinese export growth and by Moody’s Investors Service’s downgrade of Spain’s debt, the latter a reminder that Europe’s debt crisis was far from solved. Major European stock markets lost between 1% and 1.6% for the session.

A widened U.S. trade deficit in January also weighed on the U.S. market.

Early in the day investors were selling not just stocks but also most commodities on global-growth concerns. Crude oil futures in New York fell as much as $3.76 a barrel to $100.62.

But the Saudi report quickly sent oil higher again. The U.S. price settled at $102.70 a barrel, off $1.68 for the day.

The Associated Press reported that Saudi police had fired on protesters to break up a demonstration in the eastern city of Qatif.

Markets naturally are unnerved by any perceived threat to the Saudi regime. The Saudi government on Wednesday said it had boosted oil production by 1 million barrels a day in February to make up for Libyan shortfalls.

Dissidents have been calling for a "day of rage" in the kingdom on Friday to demand social reforms.

Although stocks had held up remarkably well since Feb. 18 even as oil prices rocketed, Thursday’s sell-off signaled that more investors were becoming unnerved by economic worries and geopolitical fears, said Quincy Krosby, chief market strategist at Prudential Financial in New York.

"A market that wanted to move up would have taken all of this today and said 'it doesn’t matter,' " she said.

The Dow's drop was its biggest since Aug. 11, but some broader indexes had suffered a larger decline on Feb. 22, the first significant reaction to Middle East unrest. The Standard & Poor's 500 index fell 1.9% to 1,295.11 on Thursday, a slightly smaller drop than the 2.1% loss on Feb. 22.

Key indexes still are down just modestly from their multiyear highs reached on Feb. 18. The Dow is off 3.3% from that date; the Nasdaq composite, off 1.8% on Thursday, is down 4.7% since Feb. 18.

But analysts warned that continuing unrest in Saudi Arabia could be more than many investors could take, given the risk that would pose to global oil supplies.

The rush into Treasury securities on Thursday showed investors’ worsening jitters. The yield on the 10-year T-note plummeted to a six-week low of 3.36% from 3.47% on Wednesday.

-- Tom Petruno

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Photo: Protesters in the Saudi city of Qatif on Thursday. Credit: Associated Press

 
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