US stocks slid as tight credit markets and bleak economic data forced investors to focus on the rocky road still ahead for the US economy even if Congress passes a $US700 billion rescue package this week.
The Dow shed more than 3% while the S&P 500 and Nasdaq dropped 4% as Wall Street worried the economy may slide into recession, further cutting into corporate profits.
Data showing the number of people filing for unemployment benefits hit a seven-year high painted a troubling picture, as did a report showing a steep drop in factory orders in August.
''It's almost a perfect storm and it's starting to hit home,''said Alan Lancz, president of Alan B. Lancz & Associates, adding that the weak data showed the extent of the damage from stagnating credit markets.
That added to anxiety about the fate of the government's rescue plan, which the Senate passed on Wednesday after the House rejected it in its original form. A second House vote was expected on Friday.
The price of oil plummeted more than 4% as financial market turmoil stoked concerns about demand for fuel and precious metals slid as the dollar rose.
''There's a big fear that the bill is not going to pass, which is weighing on the markets, and at the same time, we are watching commodities totally fall apart,''said Angel Mata managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.
The Dow Jones industrial average fell 348.22 points, or 3.22%, to 10,482.85, while the Standard & Poor's 500 Index slid 46.78 points, or 4.03%, to 1114.28. The Nasdaq Composite Index dropped 92.68 points, or 4.48%, to 1976.72.
Since the beginning of the year, the Dow has lost 21%, while the S&P 500 has dropped 24% and the Nasdaq has fallen 25%.
Insurance stocks, led by Hartford Financial, Principal Financial and MetLife, fell after Senate Majority Leader Harry Reid raised the question of whether a well-known insurer could be in financial trouble. Hartford shares plummeted 32% to $US25.91, Metlife slid 14.9% to $US40.96 and Principal Financial shed 16.3% to $US31.52.
Investors punished shares of technology companies such as Intel Corp, off 7.1% at $US17.20, and economic bellwethers such as heavy-equipment maker Caterpillar, whose stock tumbled 8.3% to $US52.22. Diversified manufacturers struggled after Barclays cut its outlook for the sector.
General Electric slid 9.6% to $US22.15 after the company, seeking to raise cash, said it priced a share offering below the stock's closing price on Wednesday.
IBM shares fell 4.9% to $US104.74 on the New York Stock Exchange, while on Nasdaq, shares of eBay tumbled 8.2% to $US19.15 after Morgan Stanley cut its price target on the stock of the Internet auctioneer and retailer.
Commodity-related companies' shares also weakened as commodity prices fell, with miner Freeport McMoRan Copper & Gold down 13.9% at $US45.60, after Goldman Sachs removed the stock from its ''buy'' list.
The Senate passed a revised version of the financial rescue plan two days after the House rejected an initial plan that triggered the biggest slide in US stocks in 21 years.
Still, credit market constraints persisted. The commercial paper market - short-term loans - contracted for the third straight week, as business lending and borrowing effectively shut down.
In the latest sign of faltering consumer and business spending, hotel operator Marriott International warned that 2009 would be tough, sending its shares down 5.3% to $US23.74 on the NYSE.
Trading was moderate on the New York Stock Exchange, with about 1.51 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.21 billion shares traded, slightly above last year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by about 5 to 1 on both the NYSE and on Nasdaq.
Reuters
