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Financial gloom was everywhere Tuesday.
On Wall Street, the Dow Jones industrial average came within sight of its lowest levels in more than a decade. Financial shares were battered. And rattled investors clamored to buy rainy-day investments like gold and Treasury debt. Markets from Hong Kong to Stockholm to London also staggered lower.
It was a global wave of selling spurred by rising worries about how banks, automakers - entire countries - would fare in a deepening recession.
At the close, the Dow was down more than 297.81 points, at 7,552.60 points, a drop of 3.79 percent. The index was just a few fractions of a point away from its lows of Nov. 20, when financial markets plummeted to their lowest point in a decade. The only Dow stock to trade consistently in positive territory on The only Dow stock to trade consistently in positive territory was Wal-Mart, which rose after reporting better-than-expected profit.
The broader Standard & Poor's 500-stock index slid 37.67 points, or 4.5 percent, to 789.17 points, unable to cling to what analysts said was an important trading threshold.
"If we get substantially below 800 then look out below," said Marc Groz, chief investment officer at Topos, a risk-advisory firm in Greenwich, Connecticut.
The Nasdaq composite index closed 63.70 points lower, down 4.1 percent, at 1,470.66 points.
The downward spiral came as President Obama signed the $787 billion economic stimulus package and executives at General Motors and Chrysler prepared to submit major restructuring plans to the U.S. government after receiving billions in bailout money.
General Motors stock, which was more than $25 last February, was trading lower on Tuesday, at about $2.15 a share. Shares of the Ford Motor, which has not received any bailout funds, were down 5 percent.
Analysts said investors were still nervous about the U.S. Treasury Department's plans to shore up the financial system and help remove billions of dollars in troubled mortgage-related assets from the balance sheets of major banks.
"The administration is great at floating the rumors, but we need concrete plans to back that up," said Ryan Larson, head equity trader at Voyageur Asset Management. "Without any further concreted details, the market's really left to wonder. And in this environment, they wonder the worst-case scenario."
In a sign of further deterioration in the industrial sector, a gauge of manufacturing in New York State fell precipitously in February, reflecting a plunge in new orders, prices and employment. The Empire State Manufacturing Survey, which is calculated by the Federal Reserve in Buffalo, fell to a new low of minus 34.7 in February, from minus 22.2 in January.
"Robust export demand had been the main support for U.S. manufacturing for many months," Joshua Shapiro, chief United States economist at MFR, wrote in a note. "Now, with economic activity weakening sharply around the world, exports are dropping like a stone, with the pace of decline set to accelerate significantly in the months ahead."
In Europe, attention turned to the plight of lenders active in Eastern Europe after Moody's Investors Service said it might downgrade banks with units in the region. Investors are worried about the debts owed by banks in Eastern Europe to financial institutions in West European countries, especially Austria, Belgium, Germany, Greece and Italy.
"The effects of the slowdown are continuing to widen geographically, especially to countries that have been reliant on demand in the West," said Henk Potts, equity strategist at Barclays Wealth in London.
Amid fears about exposure to Eastern Europe, Erste, a bank based in Vienna, lost 7.7 percent. Swedbank, based in Stockholm, fell 3.6 percent, while UniCredit, the Italian bank, lost 5 percent.
The International Monetary Fund has offered loans to Latvia, Hungary, Serbia and Ukraine but there is speculation that it will have to go back into the region and offer more.
"Market sentiment still remains very poor, corporate profits are under pressure and management is expressing a cautious view through 2009," Potts said.
There is also fear among investors that more banks across Europe will require capital injections from governments. In Britain, the focus has been on Lloyds Banking, which has been hobbled buy its forced merger with the stricken mortgage lender HBOS. Lloyds was off 3.2 percent Tuesday, having shed 8.1 percent Monday and 32.5 percent Friday.
The FTSE 100 index in London was down more than 2 percent while the DAX in Frankfurt slid nearly 3 percent.
In Japan, Finance Minister Shoichi Nakagawa said he would resign amid criticism of his bizarre behavior a Group of 7 news conference during the weekend. The Nikkei 225 Stock Average lost 1.4 percent. In Hong Kong, the Hang Seng index closed down 3.8 percent, while South Korea's benchmark Kospi index ended 4.1 percent lower, the biggest fall in the region.
In European trading, the euro pared initial losses as the German ZEW Feb economic sentiment index came in sharply higher than expected, showing the fourth monthly improvement. The index was minus 5.8 from minus 31 in January. It had been expected to fall to minus 28.0. The euro was at $1.2660 before midday in London, up from $1.2801 late Monday.
Separately, a report showed that the British inflation rate fell to a nine-month low in January as the deepening recession and a drop in fuel costs eased pressure on prices. Consumer prices rose 3 percent from a year earlier, compared with a 3.1 percent pace in December. The median of forecasts in a Bloomberg survey was for a rise of 2.7 percent. Prices fell 0.7 percent from December, the most since January 2008.
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