Stocks sink, ending a three-day rally

NEW YORK -- A three-day stock rally ended much like it began, with a steep and sudden turn.

Stocks started higher early Thursday but turned lower within 20 minutes. Indexes in the U.S. and Europe sank after Germany's main stock index, the DAX, suddenly dipped 4 percent. Traders struggled to explain the dive.

The Dow Jones industrial average fell 170.89 points, or 1.5 percent, to close at 11,149.82. It had been up 85 points shortly after the opening bell.

This week's trading has been marked by a series of sudden reversals. Robert Stein, a money manager responsible for $1.2 billion at Astor Asset Management, said questions about the economy have made investors uncertain and the stock market more volatile.

Earlier Thursday, the government reported an increase in the number of first-time claims for unemployment benefits last week. The Labor Department said applications for benefits rose to 417,000, the highest in five weeks. The figure was inflated by a strike at Verizon which ended this week.

The S&P 500 index fell 18.33 points, or 1.6 percent, to 1,159.27. The Nasdaq fell 48.06 points, or 1.9 percent, to 2,419.63.

There's speculation about whether Federal Reserve Chairman Ben Bernanke will offer support for the economy when he speaks today in Jackson Hole, Wyo. It was at that same symposium last year that Bernanke laid out an argument for the central bank's $600 billion bond-buying program.