By JOE BEL BRUNO
AP Business Writer
Wall Street ended another extraordinary and traumatic day, with the Dow Jones industrials plunging as much as 800 points before closing with a loss of about 370.
The catalyst for the frantic selling was investors' growing realization that the credit crisis is likely to take a heavy toll around the world. And while the Bush administration is starting to implement its $700 billion financial rescue plan, that and steps taken by other governments won't be enough to stop the global spread of credit troubles.
The Dow set a new record for a one-day point drop and also fell below 10,000 for the first time since 2004. But it recovered somewhat in erratic trading as bargain hunting set in. The blue chips fell about 370 points and finished at 9,955.50.
Stocks spiraled downward in the U.S., Europe and Asia, and drove investors to sink money into the relative safety of U.S. government debt. Fears about a global recession also caused oil to drop below $90 a barrel; and the benchmark index that gauges fear in the market jumped to the highest level in its 18-year history.
"The fact is people are scared and the only thing they're doing is selling," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working."
The selling was so extreme that only 67 stocks rose on the NYSE — and 3,155 dropped. That's a telling sign considering the stock market is considered a leading economic indicator, with investors tending to buy and sell based on where they believe the economy will be in six to nine months.
Today's steep decline on Wall Street indicates that investors are becoming more convinced that the country is leading a prolonged economic crisis that is spreading to other nations. Over the weekend, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits.
As the U.S. tries to repair its battered banking system, the German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG. And France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.
The Fed also took fresh steps to help ease credit markets. The central bank said today it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.
Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., said government intervention certainly might help. However, he believes investors are sensing that what's happening in the economy is a shift in the extent to which consumers and businesses take on debt, a change that will take years to play out.
"This is a global deleveraging of many economies," he said. "It might appear that you're going into the abyss where the economy grinds to a halt and the financial system goes into complete disarray. But, what the market is really reading here is that this is a global phenomenon, and when you delever like this, it is a process that takes a very long period of time measured in years, not quarters."
The Dow fell 3.6 percent, the Nasdaq Composite index was down 4.3 percent and the broad-based S&P 500 declined 3.9 percent.