Dow Sheds Over 2% as Oil Plunges Nearly $5

Stocks declined Wednesday amid profit-taking from the prior session's rally, a sharp drop in crude prices and lingering concerns about credit.

Crude oil pulled back by nearly $5, the biggest dollar drop in more than 17 years, to settle at $104.48 a barrel in New York Wednesday. Earlier this week, oil topped $111 a barrel. The Energy Department reported that crude inventories rose by 200,000 barrels last week, well below the 2.1-million increase expected. Gasoline inventories unexpectedly shrank.

Gold had its worst day in nearly two years, with the April contract plunging $59 to settle at $945.30 Wednesday on the New York Mercantile Exchange. Other commodities also declined, including silver, copper and agriculture futures.

The Dow's commodity stocks -- Exxon Mobil , Chevron , Dupont and Alcoa -- accounted for about forty percent of the index's decline.

Some analysts pointed to impatience in the market.

"It's the post-Fed-meeting letdown," Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Ill., said of the afternoon sell-off. "Because the market is manic depressive ... it's looking at the Fed going OK, you had your meeting yesterday, what are you going to do in April?"

Others noted that there's still a lot of fear in the market, as evident in the Chicago Board Options Exchange Volatility Index, or VIX, which jumped 14 percent.

"Consumer credit issues continue to put stress on the market as seen Discover Financial's results today," explained Steve Neimeth, portfolio manager at AIG SunAmerica in Jersey City, N.J. "We have yet to see major issues with commercial credit but investors are increasingly cautious that problems there are just around the corner," Neimeth said.

Discover Financial , the No. 4 U.S. credit-card network, reported its net income fell 65 percent but topped forecasts amid a charge related to sale of its U.K. credit-card unit. Lower borrowing costs were what helped Discover beat expectations even as consumer spending slowed. Discover, which was spun off from Morgan Stanley last year, said its 30-day delinquency rate rose 62 basis points from last year to 3.93 percent.

Meanwhile, shares of Visa surged as high as $69 a share before settling at $56.50 as the largest U.S. credit-card provider made its debut on the the New York Stock Exchange. Shares had priced at $44, raising $17.9 billion in the largest initial public offering in U.S. history.

JP Morgan , which stands to make $1 billion from the Visa IPO, saw its shares rise more than 3 percent, then pulled back for a slightly lower finish.

"There are two ways we would go with [Visa] stock," David Menlow, president of IPOFinancial.com, told CNBC. "You buy it when it goes down and you buy it when it goes up, because they are the biggest and the best at what they do. They overshadow what happens with MasterCard ... Their growth and expansion plans are really staggering."

Among other credit-card providers, shares of Mastercard and  American Express both declined.

In the wake of all the Fed actions in the past week and the collapse of Bear Stearns, there's a lot of buzz in the market that we may have already seen the bottom.

"I think we’re at the bottom of this so-called crisis. And I think we move higher from here," Fritz Meyer, senior investment officer at AIM Investments, told CNBC. "The Fed’s been fumbling around for the right key to unlock the liquidity log jam … I think they finally found it."

Neimeth agrees. "There are many investors who have huge cash on the sidelines," he said, referring to massive growth in money-market funds in the past three months. "This suggests to me that we're unlikely to get major capitulation. People put that money to work on dips."

Indeed, there is a lot of money on the sidelines. Long-term investors pumped a record amount of money into cash holdings in March, according to a Merrill Lynch survey of nearly 200 fund managers. Their appetite for risk dwindled near a record low as many felt there wasn't a compelling reason to jump off the sidelines just yet.

But Nolte said, "It's going to take time. It's going to be a grinding type of thing that wears people down. I'm still getting clients coming into my office saying, 'Can we buy China? What about gold? What about oil?' ... We won't get a meaningful rally until we've taken out everybody's confidence that this time it's for real."

The Office of Federal Housing Enterprise Oversight lowered the capital requirement on government-backed mortgage lenders Fannie Mae and Freddie Mac to 20 percent from 30 percent, a move that will provide up to $200 billion in immediate liquidity for stressed mortgage markets.