(By Salman - iStockAnalyst Writer)

US Stocks fell sharply on Thursday after weaker than expected economic data stoked recession fears. Stocks also edged lower as Interbank lending remains tight even as US Senate approved the revised $700 billion bailout plan.

The Dow Jones Industrial Average declined 348.22 points, (-3.22%), to finish at 10,482. The S&P 500 fell 46.78 (-4.03%), to 1,114.28 points. The Nasdaq Composite retreated 92.68 points, (-4.48%), to end at 1,976.2.

On Thursday, Data released by Department of Labor showed that weekly jobless claims climbed by 497,000. The jump in initial claims is being attributed to the damage wreaked by Hurricane Gustav in Louisiana and Hurricane Ike in Texas. The weekly jobless claims continue to remain at seven year high. Economists were expecting the claims to rise 475,000.

The Commerce Department reported that factory orders for August fell 4%, the biggest drop in two years. Economists were expecting a decline of 3%.Orders had risen 0.7% in July.

Meanwhile, the British Bankers' Association said that the London interbank offered rate, LIBOR, soared 6 basis points to 4.21% on Thursday, the highest since Jan. 11. The corresponding rate for euros climbed 3 basis points to a record 5.32%. The difference between the three-month London interbank offered rate for dollars and the overnight indexed swap rate widened 7 basis points to 254 basis points as of 8.44am in London.

Late On Wednesday, US Senate passed a revised $700 billion bailout plan. The modified rescue plan now includes a hike in federal deposit insurance limits, expanded health coverage for mental illnesses and a bill extending a number of tax breaks set to expire at year's end. House of Representatives is expected to vote on rescue plan on Friday. Earlier, lawmakers at House of Representatives rejected the bill on Monday.

According to reports, US Federal Reserve may consider cutting benchmark interest rates soon.

Securities and Exchange Commission extended the short-sale ban to as long as Oct. 17. The ban was expiring on Thursday night.

Bellwether Caterpillar Inc. (CAT) plunged 8.31% to $52.22 on weak factory orders data. Agriculture equipment maker Deere & Co. (DE) too lost 14.21%.

Alcoa Inc. (AA) extended losses and finished 8.89% down. Another mining company, Freeport McMoRan Copper & Gold Inc (FCX) fell 13.9% after Goldman Sachs removed the stock from its buy list.
Shares of General Electric Co. (GE) subtracted 9.59% on Thursday. Earlier, the company raised $12.2 billion by selling shares at a discount of 9.2% to Wednesday’s closing price.

Retailer Wal-Mart (WMT) declined 1.4% to $58.85.

Leading producer of GM seeds, Monsanto Co.