Blue chips logged their biggest two-day point decline on record as worries about the economy gripped the market the minute the U.S. presidential election was over.
Weak outlooks from Cisco and Toyota, dismal October retail sales and the prospect of a very grim payrolls number tomorrow fueled the selloff today.
The Dow Jones Industrial Average shed 443.48 points, or 4.9 percent, to close at 8695.79, bringing its two-day decline to 929.49, or 9.7 percent. It was the biggest two-day point drop on record for the Dow and the largest percentage decline since October 1987.
The Dow set two other two-day point-decline records during this latest decline, on Oct. 7 and Oct. 9, just before it established its recent bottom on Oct. 10. On that day, the Dow closed at 8451.19, after reaching an intraday low of 7773.71.
As of today's close, the Dow is about 250 points away from the closing low it reached that day, leaving some market pros to believe stocks are on their way to retesting those lows.
The Standard & Poor's 500 index and Nasdaqalso declined, with the S&P the hardest hit of the three.
The CBOE volatility index, which has been steadily ticking higher since bottoming at 44.25 on election day, closed just shy of 64. Still, it's a far cry from the fear gauge's peak of 89.53 in October.
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 latest round of gloomy news overshadowed any comfort traders may have taken from some pretty hefty rate cuts across the pond. The Bank of England slashed its key lending rate 1.5 percentage pointsto 3 percent and the European Central Bank cut a key rate by half a percentage point.
In the U.S., the number of workers filing first-time claims for unemployment insurance fell by 4,000to 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, and Goldman Sachs today projected it could be as much as 300,000. 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 declined 2.6 percent after the networking-gear maker warned late Wednesday that its revenue could drop as much as 10 percentin the current quarter as the economic slump spreads to Europe and Asia.
And American depositary shares of Toyota tumbled17 percentafter the Japanese 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 more than $4.50, settling at $60.77 a barrel.