Stocks sold off in the final hour of trading, an hour that has become known for wild, unpredictable swings, as a new government plan to juice money-market funds and some dismal corporate outlooks kept investors on edge.
A couple of encouraging developments — settling Lehman Brothers credit-default swaps and signs that the credit market is beginning to thaw— weren't enough to win over jittery investors.
After two attempts at a rally today, the Dow Jones Industrial Average ended down 231.77, or 2.5 percent, at 9033.66.
The S&P 500 shed 3.1 percent, while the Nasdaq lost 4.1 percent.
Under this new plan, the Federal Reserve could lend as much as $540 billion to money-market fundsto restore their liquidity.
"When the government decided to go in today and save money-market funds — that scared people," said Nadav Baum, managing director of investments at BPU Investment Management. "A lot of people are nervous," he added.
Stocks may not have pulled off a rally but today was nonetheless significant for one very good reason: The swings are getting smaller. The Dow traded in range of about 270 points today, half that of the 600- and 700-point swings we've seen earlier in October.
Indeed, the CBOE volatility index was largely flat, closing at 53.11.
“I think the stock market is in a very critical week,” Art Cashin, director of floor operations at UBS, told CNBC. “I think we may be approaching some kind of resolution by the end of this week or … the middle of next week.”
“The real question is — Is that it? Is the bottom in?” Cashin said.
“If we take out the [recent] highs ... then you’d have a strong belief around here that the bottom is in,” he said.
Citigroup shares skidded 6 percent after Goldman Sachs slapped the stock with a "sell" rating, recommending a paired trade: That investors sell Citigroup short and buy Morgan Stanley shares.
Morgan Stanley shares advanced 2.2 percent.
Shares of DuPont declined 8 percent after the chemical maker beat expectations but slashed its outlook amid weaker demand expected both in the U.S. and globally.
Shares of Pfizer ended flat after the drug maker topped forecasts for earningsbut missed on revenue. The company also sounded a note of optimism about its drug pipeline.
Caterpillar shares dropped 5.1 percent after the construction- and mining-equipment maker said its quarterly earnings fell, helped bydemand from emerging markets but weakness persisted in the U.S., Europe and Asia. Still, the company offered a somewhat buoyant outlook on the world economy.
American Express reported a decline in profit as it set aside more money to cover credit losses but the credit-card provider beat expectations. Its shares jumped 8.4 percent.
BlackRock's shares swerved 9.1 percent after the company, the largest publicly traded U.S. asset manager, reported earnings that missed Wall Street's mark.
The news wasn't much better for regional banks: Fifth Thirdbadly missed market forecasts, delivering a loss of 14 cents a share compared with expectations for a profit of 18 cents a share. US Bancorp also missed its targetand the company said its performance may be further affected by market turbulence. Shares of Fifth Third ticked slightly higher but US Bancorp fell 3 percent.
National City , a midwest regional bank hit hard by the credit crisis, announced plans to cut 4,000 jobs after posting its fifth straight quarterly loss. Its shares jumped percent.
Schering-Plough shares ended slightly lower after the drug maker beat expectations, helped by a series of restructuring and expansion moves.
Investors hammered tech stocks harder than the broader market today — the Nasdaq lost 4.1 percent — after Texas Instruments became the latest tech company to deliver a weak outlook.
TI missed its earnings target and delivered a weaker-than-expected forecast for the fourth quarter. The chip maker said it expects sales to decline "substantially" in the current quarter. TI shares tumbled 6.3 percent.
Last week, chip leader Intel also sounded a cautious note about the current quarter.
"We have a high degree of uncertainty around demand in the fourth quarter," Intel finance chief Stacy Smith said.
Even Internet behemoth Google said it may not be immune to the global slump.
"It is pretty clear the economic situation today globally is worse than people were predicting a month ago," Google CEO Eric Schmidt said.
Intel shares dropped nearly 5 percent, while Google fell 4.4 percent.
It doesn't help that many underlying factors that helped corporations during the third quarter have disappeared since the economy went into a tailspin in mid-September, Mike Helmar, an economist with Moody's Economy.com told Reuters.
Apple and Yahoo were among the biggest drags on the Nasdaq ahead of their earnings, due out after the closing bell. Analysts expect a profit of $1.11 a share from Apple and nine cents a share from Yahoo.
Apple fell more than 7 percent, while Yahoo skidded more than 6 percent in regular trading.
Dow component 3M jumped 4.4 percent after the company, which makes everything from post-it notes to Scotch tape, beat analyst estimates but said it plans to manage business "prudently" for the remainder of the year as economic conditions are expected to remain "volatile."
Shares of UAL, parent of United Airlines, shot up nearly 9 percent after the company posted a net loss but beat expectations. Airlines have also been benefitting from decline oil prices.
dropped $3.36 to close at $70.89 a barrel amid worries that the global economic slump will crush fuel demand.
Commodities stocks declined, weighing on the broader market. Freeport-McMoRan Copper & Gold shares stumbled 11 percent after the company reported its profit fell sharply and said it would curtail a planned mine expansion, given weak metal prices and economic conditions.
Ford declined 6.9 percent after Kerk Kerkorian, the largest shareholder outside of the Ford family, announced that he is paring down his stake in the auto maker— and may liquidate his entire stake — seeing better value in other industries such as gambling, hotels and oil and gas.
TUESDAY: Earnings from Apple and Yahoo after the bell
WEDNESDAY: Weekly mortgage applications; weekly oil inventories; Earnings from AT&T, Boeing, Boston Scientific, ConocoPhillips, GlaxoSmithKline, McDonald's, Merck, Northrop Grumman, Philip Morris, Wachovia, WellPoint, Wyeth, Amazon, Amgen, Pulte Homes, Sallie Mae
THURSDAY: Weekly jobless claims; weekly natural-gas inventories; Earnings from Altria, Bristol-Myers Squibb, DaimlerChrysler, Eli Lilly, Raytheon, SunTrust, Union Pacific, UPS, Xerox and Microsoft
FRIDAY: Existing-home sales; Earnings from LM Ericsson