Dow Ends Near 2-Year Low and Bear Territory

Stocks plunged Thursday after a downgrade on brokerage stocks, disappointing earnings from two tech giants and oil's break above $140 a barrel.

The Dow Jones Industrial Average fell more than 350 points, or 3 percent, to close at its lowest level since September 2006.

The S&P 500 index dropped 2.9 pecent, falling below the key 1300 mark. The tech-heavy Nasdaq lost 3.3 percent.

All three major indexes are off 18 to 19 percent from their October highs -- dangerously close to bear-market territory.

Several Dow components and several stocks in the financial sector hit multiyear lows, including General Motors , which dropped to its lowest level in more than 50 years.

All 30 Dow components finished lower, with GM racking up the biggest loss at 11 percent and ExxonMobil registering the smallest at 1.4 percent.

Light, sweet crude rose more than $5 a barrel, briefly crossing the $140 mark, before settling at a record $139.64 a barrel, after OPEC President Chakib Khelil said in an interview that oil prices could rise to as much as $170 a barrel this summer.

In economic news: The third and final reading on first-quarter GDP showed the economy grew at a 1 percent annual rate, up slightly from prior estimates of 0.9 percent and 0.6 percent, the Commerce Department reported. Jobless claims were unchanged last week, though the four-week moving average continued to climb. Existing-home sales rose 2 percent, slightly better than expected, in May, the National Association of Realtors reported.

Rippling through the market was Goldman Sachs' downgrade on U.S. brokerage firms to "neutral" from "attractive." The firm said there simply aren't any catalysts to push the stocks higher in the coming months.

(What was driving the market today? Click on the video at left.)

Goldman analyst William Tanona said Citigroup and Merrill Lynch may be forced to take writedowns of $8.9 billion and $4.2 billion, respectively, and raise additional capital. He also added Citigroup to Goldman's "Americas conviction sell" list.

Bank of America announced plans to eliminate 7,500 jobs in the next two years as it completes its acquisition of Countrywide Financial. Its shares fell 6.8 percent, making it the second biggest decliner on the Dow today.

Goldman has fared better than many of its rivals because it's less exposed to the subprime mess. But Wachovia still downgraded Goldman to "market perform" from "outperform," citing a weak outlook for capital markets. Its shares dropped 4 percent.

Many of the financials were trading at a multiyear low: Citigroup was at a 10-year low, Merrill was at a five-year low, Bank of America was trading at a 7-year low and regional bank Wachovia was at levels not seen in about 17-18 years.

Goldman Sachs also cut GM to "sell" from "neutral", reducing its price target to $11 from $19. Traders took the cue and the pushed the stock down to $11.43 a share.

A little perspective: GM's close was the lowest since 1955, when Dwight Eisenhower was in the White House and Elvis was debuting on the Ed Sullivan show. The auto maker's market cap is now about $7 billion, putting it in the bottom 10 percent of the S&P 500 by market cap, and at half the market cap of cosmetics company Avon .

A slew of other Dow components were trading at single-digit multiyear lows, including American Express , UTX and 3M .

A pair of earnings reports from the tech sector after the closing bell Wednesday roughed up the sector today -- not because of the earnings but because of the weak outlooks.

Research In Motion , the maker of the Blackberry smart phone, reported a higher first-quarter profit Wednesday, but its shares dropped sharply in after-hours trading as the results and outlook fell short of analysts' expectations, and then tumbled more than 13 percent in today's session.

Software maker Oracle