updated 5/5/2011 6:18:42 PM ET 2011-05-05T22:18:42

A free-fall in commodities and an unexpected jump in unemployment claims put financial markets on edge Thursday, dragging the stock market lower.

Oil prices fell nearly $10, or 9 percent, to close below $100 a barrel for the first time since mid-March. Silver lost 8 percent to settle at $34.41; the metal already had its biggest one-day drop in three decades on Tuesday and is nearly $16 off its high of $50 reached last week. And gold fell 2.3 percent to $1,474.90 an ounce.

Commodities like oil and cotton had risen by more than 25 percent over the past year. Some, like silver, remain up nearly 100 percent over this time last year, despite Thursday's decline. Thursday's pullback indicated that some speculators were locking in their gains and that other investors were protecting profits because of concerns that Friday's jobs reports may be worse than originally thought, say experts. That could lead to weaker demand from consumers.

Major Market Indices

"Speculators are unwinding their positions to take a profit," said Peter Fusaro, the chairman of Global Change Associates, an energy trading consultant in New York.

Stock indexes fell after the Labor Department said that first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months. Forecasters didn't see it coming. Economists had expected claims would drop to 410,000.

The Dow Jones industrial average lost 139.41 points, or 1.1 percent, to 12,584.17. The S&P 500 dropped 12.22, or 0.9 percent, to 1,335.10. The Nasdaq composite fell 13.51, or 0.5 percent, to 2,814.72.

Government bonds rose, pushing long-term interest rates to their lowest levels this year. The yield on the 10-year Treasury note sank to 3.16 percent.

Applications for unemployment benefits have increased in three of the previous four weeks. The jump in claims, along with other signs the economic recovery is losing strength, have raised concerns about what the government's monthly jobs report for April will reveal when it's released on Friday.

Economists forecast that employers added 185,000 workers in April. The unemployment rate is expected to remain unchanged at 8.8 percent.

Meanwhile, gas is nearing $4 per gallon and major packaged goods companies have implemented price increases on every day purchases, leading some analysts to worry that consumers will cut back on spending.

Prior to Wednesday, rising earnings had been driving stocks up in recent weeks. But even strong results reported Thursday by several large companies did not outweigh concerns about the economic recovery.

General Motors Co. was among the companies reporting higher profits Thursday. GM said its earnings more than tripled on stronger sales in the U.S. and China. Despite the results, GM fell 3 percent.

Other companies that reported strong earnings rose. Whole Foods Market Inc. gained 0.4 percent after its quarterly report topped Wall Street's estimates. Estee Lauder Cos. gained 1.2 percent after it said earnings doubled on stronger sales.

Despite losses over the last two days, the broader markets are up — the S&P, for one, is up 15 percent, not including dividends — in the year since the "flash crash" led many investors to flee the market.

Friday marks the one-year anniversary of the "flash crash" when the Dow sank nearly 1,000 points in less than a half hour. Some stocks lost a third of their value in four minutes.

Quotes delayed 15+ min.

The market regained most of its losses by the end of the day, but the wild ride left a mark. Fund managers say the "flash crash" made everyday investors, still wary after the financial crisis, more reluctant to trust their savings to the stock market. They began pulling cash out of mutual funds that invest in stocks and favoring bond funds instead.

A pair of economic reports pushed stocks lower Wednesday. Payroll processor ADP said companies added fewer jobs in April than economists had expected. In a separate report, the Institute for Supply Management said its service sector index rose at the slowest pace in 8 months in April.

Two stocks fell for every one that rose on the New York Stock Exchange Thursday. Consolidated volume came to 4.8 billion shares.

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