Stocks sold off in the final hour of trading sending the Dow far below the psychologically important 9000 level.
What is it going to take to get confidence back in the markets and get them turned around?
"In the immediate term we have to see the money markets return to normal," says Doug Peta strategist at JW Seligman. "And until there's tremendous upheaval in the short-term funding markets, equities will not be able to advance and the economy won't be able to function normally."
As long as the cost of capital remains high it's tough to quantify how much companies are going to earn. "Investors don't want to buy stocks if they don't know what a company can earn. And so it's tough to put a floor under this market," adds S&P strategist Alec Young.
Thursday's Trouble Spots
Shares in Morgan Stanley plunged Thursday amid concern about the status of a planned $9 billion investment by Japan's top bank, Mitsubishi UFJ Financial Group.
"There is continued unease about the prospects of the Mitsubishi deal going through, and that has also impacted (their) credit default spread," said Matt McCormick, Portfolio Manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati.
"The global economy runs on credit and when you take it away (problems) can metastasize in ways we could have never imagined even a week ago," adds Young.
Meanwhile, General Motors slid more than 20% after S&P placed the company on credit watch negative citing the weakening state of the global automobile market as well as weak capital market conditions that will remain a serious challenge "for the foreseeable future."
"Volatility is exploding and there's no safe place to hide," adds Jon Najarian.
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CNBC.com with wires