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By: CNBC.com | 06 Nov 2008 | 11:21 AM ET
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Stocks continued to slide Thursday as worries about the economy — and its impact on earnings — outweighed enthusiasm for big rate cuts in Europe.

Weak outlooks from Cisco and Toyota, dismal October retail sales and the prospect of a very grim payrolls number tomorrow rattled the market, which had a very volatile morning.

The Dow Jones Industrial Average swung from slightly lower to flat to a decline of more than 100 points, or 1 percent. The Standard & Poor's 500 index and Nasdaq dropped more than 1.5 percent.

The CBOE volatility index [VIX  Loading...      ()   ], which has been steadily ticking higher since bottoming at 44.25 on election day, topped 57. Still, it's a far cry from the fear gauge's peak of 89.53 in October.

Major U.S. Indexes
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This is the market's second straight day of decline. All three indexes shed more than 5 percent on Wednesday as anxiety over the economy returned after a brief sigh of relief following the historic presidential election in which Barack Obama became the first African-American to be elected president.

The Bank of England slashed its key lending rate 1.5 percentage points to 3 percent and the European Central Bank cut a key rate by half a percentage point, but the momentum quickly stalled.

"They're coming to the party with some big numbers—certainly a surprise—but the reaction in the States was more muted than what I would have guessed," Kevin Ferry, of Cronus Futures Management, told CNBC. "Certainly a welcomed addition to the party. Even though they're coming late they're coming big."

Back in the U.S., the market was largely unfazed by the weekly jobless-claim report, which showed the number of workers filing first-time claims for unemployment insurance fell by 4,000 to 481,000 last week, in-line with expectations. The prior week, however, was revised to 485,000 from 479,000. The four-week moving average, which smooths out weekly fluctuations, was unchanged at 477,000.

U.S. business productivity slowed sharply in the third quarter, indicating that wave of layoffs is starting to take a toll on business output. Productivity fell to an annual rate of 1.1 percent, the Labor Department reported, less than a third of the 3.6 percent rate in the second quarter. Output posted its biggest drop in seven years.

The big number on the market's mind is tomorrow's payrolls number. Economists expect a drop of 200,000, which would be the 10th straight decline and the biggest drop in 5 1/2 years.

And the market buzz is that that may be too optimistic.

The whisper numbers are probably closer to 250,000 or more, says Miller Tabak's Tony Crescenzi. That's a far cry from a few months ago, when forecasts were calling for declines of around 75,000, suggesting that "the degree of preparedness for bad news has reached new heights," Crescenzi wrote in a morning note.

Cisco shares [CSCO  Loading...      ()   ] declined after the networking-gear maker warned late Wednesday that its revenue could drop as much as 10 percent in the current quarter as the economic slump spreads to Europe and Asia.

And American depositary shares of Toyota [JLL  Loading...      ()   ] tumbled after the auto maker slashed its annual operating profit forecast by more than half, as the financial crisis hit auto demand, cut access to credit and sent the yen higher.

Oil prices also continued to reverse a sharp move higher Monday, with crude dropping nearly $1 below $65 a barrel.

The only ray of light came from Wal-Mart [WMT  Loading...      ()   ], which reported October sales up 2.4 percent, better than expected, and said it would continue to slash prices every week until Christmas. The chain dubbed its effort to help cash-strapped consumers "Operation Main Street." Shares edged higher premarket.

Dana Telsey, of the Telsey Advisory Group, analyzes retail sales in video at left.

Asian stocks sank, overwhelmed by recession fears, while oil companies and banks dragged down European stocks.

Obama's victory and an expanded majority in Congress could encourage Democrats to make up a list of economic stimulus measures by Christmas, as more and more people ask "where is my bailout," analysts told CNBC. 

Some companies seem to be seeking opportunities with LaSalle Investment Management [JLL  Loading...      ()   ] announcing it is raising a 400 million pound ($632 million) fund to pick up bargain property in a British market, where some assets are being sold at 20-30 percent discounts to their value.

Major Wall Street firms are expected to slash annual bonuses for executives an average 50 percent or more, senior executives told CNBC.

Rupert Murdoch's News Corp [NWS  Loading...      ()   ] cut its full-year forecast and posted a worse-than-expected 30 percent drop in quarterly profit because of falling TV advertising.

Belgian brewer InBev insisted its $52 billion takeover of Anheuser-Busch [BUD  Loading...      ()   ] was on track after third-quarter results slightly exceeded expectations despite rocketing costs.

Shares of Playboy Enterprises [PLA  Loading...      ()   ] tumbled after the adult-entertainment company projected a sharp decline in ad revenue for the current quarter after posting a loss for the third quarter.

Still to Come:

THURSDAY: Monthly chain-store sales; Earnings from Anheuser-Busch
FRIDAY: Jobs report; pending-home sales; wholesale trade; consumer credit; Earnings from Ford, Sprint Nextel and Berkshire Hathaway

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