Just when Americans put aside their fears and started buying stocks again, here come a host of reminders of why they left.
Ominous news from around the world caused stocks to plummet on Thursday, sending the Dow Jones industrial average to the worst one-day drop in seven months.
Claims for unemployment insurance rose unexpectedly. A credit rating agency lowered Spain's credit grade, amplifying worries that Europe's debt crisis will worsen. China's economy showed a surprising sign of weakness _ a trade deficit brought on in part by surging oil prices.
And just when markets started bouncing back, Saudi police opened fire on protesters in the eastern city of Qatif, raising concerns about the stability of the oil-rich kingdom. Oil prices swung wildly, and the Dow again dipped below the 12,000 mark.
Major stock indexes had been plodding steadily higher month after month, luring investors back in with gains of 24 percent since August. But Thursday's steep drop, following a recent roller coaster of market dives, could cause some of them to return to their hiding spots.
"You've had people plowing into this market," said Nicholas Colas, ConvergEx Group chief market strategist. "And nothing makes you take your foot off the accelerator like seeing an accident."
The Dow Jones industrial average fell 228.48 points, or 1.9 percent, to close at 11,984.61. McDonald's Corp. was the only stock in the Dow 30 that rose.
The Standard & Poor's 500 index fell 24.91, or 1.9 percent, to 1,295.11. The Dow and S&P 500 are still up 3 percent since the start of the year. The Nasdaq composite fell 50.70, or 1.8 percent, to 2,701.02.
Thursday's drop in the Dow was the biggest since Aug. 11. The S&P had a larger fall recently, dropping 27.57 points on Feb. 22 as the uprising against Libyan leader Moammar Gadhafi gained strength.
The stock market has become much more turbulent in the past three weeks. Blame it on oil.
Crude oil prices have jumped $20 a barrel since protests spread through North Africa and the Middle East, raising concerns that the flow of crude oil will be disrupted. Federal Reserve Chairman Ben Bernanke warned last week that consistently high oil prices could undermine the U.S. economic recovery.
Since the uprising in Libya started and oil prices began rising in mid-February, the Dow Jones industrial average has lost 100 points or more on four days. Twice it gained 100 or more points.
By contrast, the Dow had just two such swings in January and two in December. And only one of those was a loss.
"The tone of the market has clearly changed," said Quincy Krosby, chief market strategist at Prudential Financial. "The market trend had been to buy rather than sell and that bad news doesn't matter."
The sharp swings come shortly after individual investors, long wary of the stock market, started returning. Investors put $36.1 billion into U.S. stock mutual funds in January and February, according to the research firm Strategic Insight. Over the previous eight months, they had withdrawn $66.1 billion.
But the little guy has notoriously bad timing. When average investors pile in or out of stocks, it's often a sign the market is about to reverse course.
Large investors like Bill Gross and Carl Icahn have recently been warning that the market rally could soon hit a wall. Icahn said this week he would return $1.76 billion to investors in his hedge funds because he doesn't want to be responsible to them for "another possible market crisis." Icahn also said he was concerned about the economic outlook and trouble in the Middle East.
Oil prices exceed $100 a barrel. They had declined significantly Thursday on weak economic news, but recouped most of those losses after the police shootings in Saudi Arabia.
Oil traders will be closely watching the kingdom again Friday, when activists demanding democratic reforms have called for more protests. Government officials have warned they will take strong action if activists take to the streets.
Saudi Arabia is the world's largest oil exporter and among only a handful that can increase production by sizable levels to meet demand increases.
Investors moved money into relatively stable investments as stock prices fell. Treasury prices rose, sending the yield on the 10-year note down to 3.37 percent from 3.47 percent late Wednesday.
Five stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume was 4.8 billion shares.
AP Business Writers Francesca Levy, David K. Randall and Chris Kahn contributed to this story.