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Wall St tanks on dimming Europe hopes

New York - US stocks fell sharply on Thursday on worries that Europe will fail to muster the firepower needed to contain the eurozone debt crisis after the ECB chief dashed hopes for big bond purchases.

The blue-chip Dow Jones Industrial Average tumbled 198.67 points to finish the day at 11 997.70.

The broader S&P 500 lost 26.66 points to 1 234.35, while the Nasdaq slid 52.83 points to 2 596.38.

"Positive US economic data and an unexpected rate cut by the ECB were overshadowed by disparaging comments from Europe's central bank head," said Scott Marcouiller at Wells Fargo Advisors.

"Stocks closed the day's trade with all major US averages at session lows," he added.

Wall Street opened on the downside, but selling accelerated after European Central Bank president Mario Draghi reiterated opposition to significantly stepping up the bank's purchases of government bonds to stanch the crisis.

Draghi said the bank's purchases were "limited" and "temporary," and that governments must to "do their utmost" to resolve the crisis.

Draghi's comments spooked markets on both sides of the Atlantic hours before a crucial two-day European Union summit opened in Brussels to address the crisis.

The European worries overshadowed better-than-expected numbers on the beleaguered US jobs market.

The Labor Department reported first-time unemployment insurance claims fell six percent last week from the prior week, to a nearly 10-month low.

Financials proved a main drag. The EU banking regulator said that Europe's banks must raise an extra €114.7bn in new capital to restore stability and confidence in markets.

JPMorgan Chase lost 5.2%, Bank of America shed 5.1% and Goldman Sachs tumbled 5%. Morgan Stanley plunged 8.4%.

Ford fell 3% after announcing it would begin paying dividends for the first time in more than five years.

Boeing slipped only 0.6% after the machinists union ratified a four-year contract and the aerospace giant sealed a $1.2bn deal for four 787 Dreamliners and four 737s with Air Lease Corporation.

Bonds rallied. The yield on the 10-year Treasury fell to 1.97% from 2.02% late on Wednesday, while the 30-year yield dropped to 3.00% from 3.04%.

Bond prices and yields move in opposite directions.

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