Stocks dropped sharply on Thursday after jobless claims increased and the government scrapped plans to sell off stock in Citigroup (C) indicating that the path to recovery will remain balky. Investors backed off and took most exchange-traded funds down as they did.

In Washington, a Senate panel lent its support to Ben Bernanke for a second term as Federal Reserve chairman, news that triggered mixed reactions.

The Dow Jones Industrial Average closed down 133 points at 10308. The S&P 500 finished down 13 at 1096, and the Nasdaq dropped 27 to 2180. The major indexes were weighed down by Citigroup, which lost ground after the U.S. government's decision to shelve the sale of part of its stake rather than sell it for a loss. Investors were dismayed at the low price that Citigroup was able to get for a secondary share offering and concerned about the offering's dilutive effect on shareholders.

In economic news, the Labor Department reported an unexpected rise in the number of workers collecting unemployment for more than a week. Initial claims for jobless benefits rose 7,000 to a seasonally adjusted 480,000 in the week ended Dec. 12, the Labor Department said on Thursday in its weekly report. Economists surveyed by Dow Jones Newswires had expected claims would fall by 9,000. However, the four-week average of new claims, which aims to smooth volatility in the data, fell 5,250 to 467,500 marking its 15th consecutive drop.

Stock futures had already moved lower prior to the jobless data on continued worries over when the Federal Reserve might retreat from its easy-money policy. On Wednesday, the Fed noted improving economic conditions although it left its interest-target between 0% and 0.25%, where it's been for a year.

In other markets on Thursday morning, the dollar and Treasurys climbed while crude-oil futures and gold futures fell.

As of 4:10 p.m. EST., crude oil futures trading on the Nymex regained most of their earlier losses rising a penny to $72.67 a barrel following a more than $2-a-barrel climb on Wednesday after the Energy Department reported lower inventories.

For a detailed rundown on Thursday s trading session see our market story.

Winners

The United States Natural Gas fund (UNG) again benefited from a drop in oil prices rising 4%. The flight from equities pushed the iShares Barclays 20+ Year Treasury Bond fund (TLT) up 1.6%.

Losers

Gold prices shed $39 an ounce, a 3.4% drop. That pasted shares of the Market Vectors Gold Miners fund (GDX) knocking them down 6.2%. Fears that central banks will pull back on national stimulus plans prompted a flight from commodities sending Brazil's Bovespa index to its largest drop in a month and dropping shares of the iShares MSCI Brazil Index fund (EWZ) by 4.6%.

Thursday s Industry Headlines

Launching Pad
State Street Global Advisors, the investment management business of State Street Corporation (STT), launched the SPDR Barclays Capital Short Term Corporate Bond exchange-traded fund (SCPB) on the New York Stock Exchange. Designed to improve access to investment-grade short-term corporate bonds, the SPDR Barclays Capital Short Term Corporate Bond ETF seeks to track the price and yield performance of the Barclays Capital U.S. 1-3 Year Corporate Bond Index. The index includes corporate issues that have a remaining maturity of greater than or equal to one year and less than three years, are rated investment grade, and have $250 million or more of outstanding face value. Its annual expense ratio is 0.12%.

Friday s Notebook

Earnings and Conference Calls
CarMax, Darden Restaurants, Neogen, Patheon, Stewart Enterprises, Xenos Group

Economic Data
No major economic indicators scheduled.