Stocks fall more than 1% as borrowing costs in several European countries continued to soar, inflaming eurozone debt contagion fears.

NEW YORK (TheStreet) -- Stocks were falling more than 1% as borrowing costs in several European countries continued to soar, inflaming eurozone debt contagion fears.

The Dow Jones Industrial Average was falling 152 points, or 1.3%, at 11,753 after trading down two of the last three sessions. Of the Dow components, only Verizon(:VZ) was trading in positive territory, up a mere 0.05%.

The S&P 500 was dropping 21 points, or 1.7%, at 1216 and the Nasdaq was shedding 52 points, or 2%, at 2588.

Unpredictability from European headlines have made it difficult for stocks to hold gains. In Thursday early afternoon, more than 2 billion shares had changed hands on the New York Stock Exchange and more than 1 billion on the Nasdaq. In the previous session, the Dow slid 1.6%, with most of the losses coming in the final hour of trading on news that Fitch Ratings predicted a worsening outlook on the credit of U.S. banks.

Fears that Spain is getting sucked into Europe's debt debacle deepened Wednesday after the country paid the highest interest rates on its 10-year benchmark in a government bond auction since 1997. Yields on the Spanish 10-year bond were last at 6.49%. France, the eurozone's second-largest economy, had an easier time with its debt auction today, but still had to pay a markedly higher price. Meanwhile, Italy's borrowing costs have soared to unsustainable levels, with yields on its 10-year bonds still dangerously close to 7%.

"When you see US market futures rising overnight, right into the Spanish bond auction results at 4:30 a.m. EST, and then see those futures taking a huge dive when the auction's awful, with extremely high rates -- much higher than a month ago -- you know the buyers of those futures at 4:29 a.m. were idiots," said RealMoney columnist and Action Alerts PLUS portfolio manager Jim Cramer.

Despite worries that the contagion has picked up pace, Germany remains steadfast that the European Central Bank cannot act as a lender of last resort. At the same time, eurozone officials and the International Monetary Fund have explored the possibility of letting the ECB lend to the IMF, according to Reuters. Furthermore, France has also shown signs of allowing the central bank to expand its role. French finance minister Francois Baroin suggested late yesterday that Europe give the ECB a bank license, thereby allowing the ECB to provide further funding for struggling nations.

"We consider that the best way to avoid contagion is to have a solid firewall" said Baroin. "We haven't won the argument. We won't make it a casus belli, but naturally we continue to think it would be the best way to bring stability to Europe."

US economic data, which has buffered market sentiment in past trading sessions, continued to help offset concerns about Europe. The latest read on weekly jobless claims in the week ended Nov. 12 dropped by 5,000 to 388,000, marking a seven-month low. The reading was better than economists had expected, although the prior week's claims were upwardly revised.

A 0.3% decline in housing starts in October to an annual rate of 628,000 suggested that the housing market is stabilizing and may become less of a drag on the economy. Starts were expected to have fallen to an annualized pace of 610,000 in October from the originally estimated pace of 658,000 in the prior month. September's figure was downwardly revised to 630,000. Meanwhile, building permits in October increased by 10.9% to the highest level since March 2010.

"Housing data is firm due to the single family gains in starts and permits, though with permits, the volatile multi-family sector is at least an eyebrow raiser," wrote David Ader, a strategist with CRT Capital Group, in a research note. However, Ader noted that the reports were consistent with other recent data. "We have a fourth quarter theme of firming," he added.

Stocks saw a short-lived bounce at 10 a.m. ET after promising details in a report on business outlook for the Philadelphia region. Employment and the six-month outlook improved even though the index's headline figure slipped more than economists expected. The overall business outlook came in at a reading of 3.6 in November, down from 8.7 in October and lower than the forecasted 8.0 reading.

Oil was slipping Thursday after prices broke above $100 a barrel Wednesday for the first time since early June. The January crude oil contract was down $3.09 to trade at $99.51 a barrel. In other commodities, gold for December delivery was down $55.70 to trade at $1,718.60 an ounce.

As with stocks, commodities volumes have been muted. Traders attribute the recent drop in contracts for crude, oil, gold and wheat futures to the collapse of clearing firm MF Global Holdings, which worked with exchanges to ensure smooth trading operations.

London's FTSE lost 1.56% and Germany's DAX slipped 1.07% at the European markets' close. Overnight, Asian stocks closed mixed, with Japan's Nikkei Average edging up 0.19% and Hong Kong's Hang Seng down 0.76%.

In corporate news, Applied Materials(:AMAT) was falling over 8% after the maker of semiconductor equipment reported a 3% drop in fiscal fourth-quarter earnings of $456 million, or 34 cents a share. Adjusted earnings were 21 cents a share. Analysts were expecting profit of 19 cents. The company also said current-quarter results would come in below analysts' expectations.

UBS(:UBS) was down more than 2% after saying it will downsize several businesses, slash up to 2,000 jobs and step up its focus on wealth management as part of a major overhaul of its investment banking strategy. The Swiss bank said in an investor presentation that it will attempt to transform itself into an organization that is focused, less complex and less capital-intensive.

Google(:GOOG) was falling 1.8% after launching an online music service to compete with Apple(:AAPL), Amazon(:AMZN) and Facebook in the music and entertainment space. Google Music allows users to upload up to 20,000 songs from their personal music collection for free to any device, including their computer, Android phone or tablet.

NetApp(:NTAP) was dropping almost 12% after missing Wall Street's second-quarter revenue expectations and noting softness in some of its largest customer accounts. Despite, beating profit estimates, the storage provider offered weak guidance for the third quarter.

Sears(:SHLD) was falling 4.4% after its adjusted third-quarter loss of $2.57 a share came in wider than analysts' expectations and the year-earlier loss of $1.71 a share. Analysts forecasted a loss of $2.29 a share. The reported loss for the quarter was $421 million, or $3.95 a share, up from $215 million, or $1.98, a year earlier.

Williams-Sonoma(:WSM) was up 0.1% after its third-quarter net income rose 19%. The home products retailer also raised the estimate for fiscal 2012 earnings.

The euro was losing ground while the dollar was up 0.3% compared with a basket of currencies. In the bond market, yields on 10-year Treasuries were falling almost 2%.

-- Written by Andrea Tse and Chao Deng in New York.