* Dow sinks another 500 points
* 10-year bond yields creep up to near four-year highs
* Weekly jobless claims fall to lowest level in nearly 45 years
* Volatility measure VIX eases but remains elevated at 29.82
* Dow -2.01 pct, S&P -1.65 pct, Nasdaq -1.83 pct
(Updates to early afternoon)
By Tanya Agrawal
Feb 8 (Reuters) - The Dow Jones Industrial Average sank another 500 points on Thursday as a renewed rise in U.S. bond yields and fears of higher inflation unnerve investors still piecing over a historic drop earlier this week.
The 10-year U.S. Treasury yield rose to a high of 2.884 percent in morning trade, nearing Monday's four-year peak of 2.885 percent after the Bank of England said interest rates probably need to rise sooner than previously expected.
That added to expectations that the world's major central banks are now firmly on course to wind down the emergency stimulus they have pumped through the financial system since 2009, driving an almost decade-long stock market rally. "Things haven't quietened down. Things are all over the place. The market is trying to find a bottom to this madness," said Jason Ware, chief investment officer at Albion Financial Group.
"Now we are having acute attention on what happens in the bond markets, so when yields move up there is an unsettling feeling in the equity market."
The market's main gauge of volatility, the CBOE Volatility Index , fell to 29.82 on Thursday, more than twice what it was a week ago but down off a two-and-a-half year high above 50 points hit on Tuesday.
Investors are still weighing whether the sharp swings this week are the start of a deeper correction or just a temporary bump in the nine-year bull market, spurred by concerns over rising interest rates and bond yields.
By 12:24 p.m. ET (1724 GMT), the Dow Jones Industrial Average was down 499.18 points, or 2.01 percent, at 24,394.17, the S&P 500 was down 44.5 points, or 1.65 percent, at 2,637.16.
The Nasdaq Composite was down 129.01 points, or 1.83 percent, at 6,922.98.
Nine of the 11 major S&P sectors were lower, with the financial , consumer discretionary and industrials leading the decliners.
Boeing was down 3 percent and Home Depot fell 3.2 percent, weighing the most on the Dow, while JPMorgan was among the top drags on the S&P.
(Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)
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