Dow Down 400 as Earnings Rattle Market

Stocks fell sharply Wednesday after the latest bevy of big names reporting earnings issued gloomy outlooks or missed their targets altogether.

The Dow Jones Industrial Average was back down near its session low, down nearly 400 points, or more than 4 percent. The S&P 500 was also down more than 4 percent, while the Nasdaq lost about 3 percent.

Investors will be watching to see if we test recent lows but even at the Dow's low point today, it was still about 200 points from its closing low of 8451.19 on Friday, Oct. 10 and nearly 1,000 points from its intraday low, reached on the same day, of 7773.71.

Still, investors were jittery. The CBOE volatility index, widely considered the best gauge of fear in the market, was up 25 percent at around 65, after earlier topping the 70 mark.

Treasury Undersecretary David McCormick said the next few quarters would continue to be challenging, but the economy could start to recover late next year.

"Halloween is coming next week and everyone is afraid of the boogeyman … it's fear and rumors and hysteria, but I think for people with a steady hand and a cool head there's tremendous opportunities," Bill Spiropoulos, CEO of CoreStates Capital Advisors, told CNBC.

Indeed, market pros are increasingly saying swallow your fear because now is the time to start buying.

"You really have to start to put some money to work," Dan Genter, of RNC Genter Capital Management in St. Louis, told CNBC. He advises putting a third of your money in now, a third in December and a third in January. "That starts to put you in a big position," Genter said.

He advises investing in high-dividend stocks and says that municipal bonds are "the sale of the century." He also likes energy stocks and some of the big banks such as JPMorgan and Bank of America .

Scott Wren, a senior equity strategist at Wachovia Securities, says after two years of playing defense with health care and staples, his team is advising clients to start looking beyond the economic doom and gloom of the next six months and start to get into cyclical stocks such as consumer discretionary and industrials.

"If you can look ahead, if you have that multiyear outlook — which I think you need to have right now — you ... need to be unloading, lightening up on defensives and start buying these more cyclical issues," Wren said.

"Construction and farm machinery, air freight and logistics, department stores -- Those are the kind of things that are going to benefit once the economy swings up," Wren said.

Indeed, the volatility in the market has proven that anything is possible. Today's session could "turn the tide and go black," Spiropoulos said.

We now return to your regularly-scheduled gloom and doom program with today's earnings news:

Boeing badly missed expectations with a 96-cent per-share loss against expectations of a 98-cent profit; AT&T missed with earnings of 67 cents a share, below the estimate of 71 cents a share; and Merck beat expectations by a penny with an 80-cent per-share profit but its earnings were weighed down with restructuring costs.

>>Click here to see a roundup of today's earnings.

Wachovia reported it swung to a third-quarter loss of $4.8 billion, excluding impairment and expenses, as it struggles under the crush of the credit collapse.

There were a few bright spots in the earnings picture.

You know what they say, when the going gets tough, the tough get french fries: McDonald's beat expectations, helped by a 7.1-percent increase in global sales.

And Apple . reported after the bell Tuesday that its profit rose 26 percent, driven by sales of its new iPhone, though the tech giant out-lowballed its usually lowball outlook with a particularly gloomy forecast. Still, investors shook it off and bid up the stock more than 6 percent.

Yahoo met expectations but lowered its outlook and said it will prune its workforce by 10 percent. The stock rose about 5 percent.

Still to Come:

WEDNESDAY: Earnings from Amazon, Amgen, Pulte Homes and Sallie Mae after the bell
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

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AT&T posted a profit of 67 cents a share. An earlier version of this story mistakenly said that AT&T reported a loss of 67 cents a share.