Stocks Tumble amid Economic Fears

U.S. stocks fell to their lowest levels in more than five years Wednesday amid more volatility and worries about a serious economic slowdown not only in the U.S. but worldwide.

On Wednesday, the Dow Jones Industrial Average tumbled 514.45 points, or 5.69%, to 8,519.21. The broad S&P 500 shed 58.27 points, or 6.1%, to 896.78. The tech-heavy Nasdaq composite fell 80.93 points, or 4.77%, to end at 1,615.75.

In recent trading sessions, stocks appeared to be digging out of the deep hole they had excavated in September and early October. But at Wednesday's close the S&P 500 plunged to a new low for the year, a level it has not seen since April 2003.

"This is a market that is leaving most people without words for description," says Chris Johnson of Johnson Research Group. On Wednesday, there was more evidence that the credit crunch, which caused so much concern in the past month, was easing slightly. However, "the market doesn't have any shortage of things to worry about," Johnson says.

Among the alarming developments Wednesday were signs that the world's worst financial crisis in 80 years is hammering emerging markets. That prompted emergency central bank moves and calls for international help to curb investor flight. Reuters reported emerging market stocks, sovereign debt and currencies all came under intense pressure as investors unwound funding positions amid worries about the deteriorating world economy.

Hungary ratcheted up interest rates by three full points to defend its currency. Belarus's central bank said it had requested credit from the International Monetary Fund and Ukrainian Prime Minister Yulia Tymoshenko said she expected her country would receive "substantial" financial aid from the IMF next week. The IMF is also ready to help Pakistan, which needs funds to avoid a balance of payments crisis, and Iceland, driven close to bankruptcy as frozen credit markets caused its banks to fail.

Hemmed in by the global financial squeeze and commodities slump, Argentina's leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggy bank of the nation's private pension system, according to a Wall Street Journal dispatch. The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade.

Reflecting worries about the world economy, commodity prices continued to slide Wednesday. On the NYMEX, crude oil dropped $4.80, or 6.65%, to $67.38. The Energy Dept.'s weekly report showed that crude oil inventories rose 3.2 million barrels, above analysts' forecast of a rise of 2.9 million barrels. Many traders worry the world is headed into a severe recession that will reduce demand for all commodities, fears that overshadow OPEC's emergency meeting in Vienna on Friday, where the cartel is expected to cut output 1 million barrels.

"The market is trying to assess how deep this global recession is going to be," says Peter Cardillo, chief market economist at Avalon Partners. While lower oil prices may be good for U.S. consumers, falling commodities hurt emerging economies that have been an engine of global growth in recent years, he says.

December gold futures sank $37 to $731 per ounce as the dollar index soared against most currencies on foreign bank demand.