S&P, Nasdaq Close at Five-Year Lows

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 finished down 514.45, or 5.7 percent, at 8519.21. The blue-chip index saw wild swings and dramatic falls today, particularly in the last half hour: At one point in the final 15 minutes of trading, the Dow was down nearly 700 points.

Today was the Dow's seventh biggest point drop in history. Of the top 10 drops, four have occurred this month. The Dow is now off more than 5600 points, or 40 percent, from its October 9, 2007 high of 14164.53 -- that's twice as much as the 20 percent required to declare a bear market.

"This is the worst first year of a bear market in history," Wayne Kaufman, chief market analyst at John Thomas Financial, told CNBC.

The S&P 500 and Nasdaq closed at five-year lows. The S&P shed 6.1 percent, ending at 896.78, while the Nasdaq lost nearly 4.8 percent, finishing at 1615.75.

Investors are watching carefully to see if we retest the recent lows, set a week and a half ago. The S&P and Nasdaq have obviously fallen through those levels, but the Dow is now about 70 points from where it closed that day, and about 750 points from the intraday low of that day, 7773.71.

Investors were jittery. The CBOE volatility index, widely considered the best gauge of fear in the market, was up 31 percent, closing just shy of 70.

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 shares fell 7.5 percent after the aerospace giant badly missed expectations with a 96-cent per-share loss against expectations of a 98-cent profit.

AT&T shed 7.6 percent after the telecom company missed with earnings of 67 cents a share, below the estimate of 71 cents a share.

Merck dropped 6.5 percent after the pharmaceutical company 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 slipped 6.2 percent after the bank 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. Its shares lost 1.7 percent.

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. Its shares jumped 5.9 percent.

Yahoo met expectations but lowered its outlook and said it will prune its workforce by 10 percent. The stock rose about 5 percent. Shares rose 2.7 percent.

SanDisk plunged 32 percent after Samsung Electronics walked away from its nearly $6 billion bid for the flash-memory maker, citing an uncertain outlook among the reasons.

Energy stocks tumbled more than 10 percent as crude oil fell more than $5 to settle at $66.75, its lowest close since June 2007.

Dow component ExxonMobil fell 9.7 percent, making it one of the biggest drags on the Dow.

(Track all of the Dow 30 stocks.)

Rival ConocoPhillips lost 9.1 percent after the company slashed its exploration and production outlook.

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

Send comments to cindy.perman@nbcuni.com.

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.