US STOCKS-Dow falls to 6-year low as banks slide

* Dow closes at more than 6-year low as banks fall

* Jobless claims show further labor market weakness

* Hewlett-Packard falls after giving disappointing outlook

* Dow, S&P 500 off 1.2 pct; Nasdaq off 1.7 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to close)

By Leah Schnurr

NEW YORK, Feb 19 (Reuters) - The Dow industrials closed at a more than six-year low on Thursday as investor fears that banks could be nationalized drove their stocks to a 17-year low and a rise in the number people receiving jobless benefits to a record high stoked worries about the deepening recession.

After several near misses this week, blue chips blew through the Nov. 20 bear market closing low in late trade, erasing a year-end rally built on hopes a new president would successfully tackle the deepening recession.

The Nasdaq fared the worst of the three major indexes after a disappointing outlook from Hewlett-Packard Co (HPQ.N) sent its stock down almost 8 percent and dragged down other technology shares, Hewlett-Packard, the world's largest PC maker, which warned its expects weak market conditions to persist, was also the Dow's biggest negative weight.

Shares of major banks tumbled on concerns about government plans to mop up bad assets from their books. The KBW banks index .BKX fell to its lowest level since 1992, led by a 14 percent slide in Bank of America (BAC.N) shares.

"There seems to be a whiff in the air that we're moving much closer to (bank) nationalization, which would effectively wipe out stockholders," said Paul Nolte, director of investments at Hinsdale Associates, in Hinsdale Illinois.

Economic bellwether General Electric (GE.N), whose operations include a big financial unit, tumbled more than 4 percent and briefly traded below $10 for the first time since 1995, adjusted for stock splits.

The Dow Jones industrial average .DJI lost 89.68 points, or 1.19 percent, to close at 7,465.95, after setting an intraday bear market low of 7,447.55. The Standard & Poor's 500 Index .SPX gave up 9.48 points, or 1.20 percent, to 778.94. The Nasdaq Composite Index .IXIC was down 25.15 points, or 1.71 percent, at 1,442.82

Since the start of the year, the Dow has fallen nearly 15 percent.

The S&P, which suffered a fourth straight day of losses on Thursday that marked its longest losing streak since October, has lost close to 14 percent for the year. The broad S&P is now up almost 4 percent from its November lows after entering the year up about 20 percent from those levels.

Analysts noted that despite the new lows, the market had not seen the rapid sell-offs that were characteristic of October and November and volume was light, indicating a lack of conviction