The Dow Jones Industrial Average was recently down 154.76 points, or 1.3%, at 12100.23, hurt by declines of more than 2% in each of its three banking components. The Nasdaq Composite Index was down 1.2%, or 27.26 points, at 2245.55. The Standard & Poor's 500 was off 1.6%, or 21.04 points, at 1312.66, led by its financial sector, off 2.9%.

Fears that investors would be forced to liquidate holdings resurfaced Thursday, sparked by news that Carlyle Capital, managed by Washington private-equity giant Carlyle Group, failed to meet margin calls on its $21.7 billion portfolio. In addition, Thornburg Mortgage Asset said late Wednesday it failed to meet a margin call of about $28 million, triggering a string of cross-defaults. Shares of Thornburg Mortgage plunged more than 55%.

Other companies that initiate or hold mortgage loans were hit hard. Anworth Mortgage Asset slid more than 25%. MFA Mortgage Investments was down nearly 19%. Annaly Capital Management fell more than 22% on Thursday. The Dow Jones Wilshire Real Estate Investment Trust Index tumbled 2.4%, or 4.79 points, to 193.49.

IndyMac Bancorp shares tumbled nearly 8%, and shares of Countrywide Financial fell 5.8%. Washington Mutual shares fell 6.5%.

Fannie Mae fell 8.4% and Freddie Mac slid 6.8% after the Treasury Department denied rumors that the government would provide an explicit guarantee of the congressionally chartered lenders' debt.

Meanwhile, the dollar dropped to a fresh all-time low against the euro, which rallied to $1.538. Both the European Central Bank and The Bank of England announced early Thursday that they would leave interest rates unchanged.

The British pound traded higher at $2.0084 recently versus $1.9908 late Tuesday. The dollar also hit a historic low against the Swiss franc at 1.0282 Swiss francs.

The Labor Department reported that new applications filed for unemployment insurance fell by a seasonally adjusted 24,000 to 351,000 for the week ending March 1. The number of people continuing to collect unemployment benefits rose by a sharp 29,000 to 2.83 million, the highest level since late September 2005.

"The economy is at stall speed right now," said strategist Stephen Wood, of asset management firm Russell Investment Group in New York. "Whether we actually get a recession, technically speaking, doesn't really matter because it already feels that way to the average consumer."

Merrill Lynch increased the conversion rate on some of its option notes by 17%, marking another step in market dilution as cash strapped investment firms like Merrill try to retain and raise as much capital as they can. Shares of Merrill fell more than 6%.

On Thursday, retailers posted February same-store sales that largely defied expectations of a third-straight month of little same-store-sales growth. Leading the way was Dow component Wal-Mart Stores, which posted a 1% increase in U.S. same-store sales excluding fuel. Shares of Wal-Mart rose 1.4%.

Shares of Ambac Financial Group slid 8.3%, extending losses the day after the battered bond insurer said it will try to raise $1.5 billion in fresh capital and stop insuring mortgage-backed debt to defend the key AAA rating at subsidiary Ambac Assurance.

Oil prices held steady after briefly spiking to an intraday record $105.10 a barrel. Oil recently traded up 5 cents at $104.57 in New York.

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source: www.wsj.com