Stocks ended at their session lows Monday following the latest wave of dismal news: Retailers reported profit declines, big banks prepared for job cuts and Japan officially declared itself in a recession.
The Dow Jones Industrial Average shed 223.73, or 2.6 percent, to close at 8273.58, the lowest close since Oct. 27. When combined with Friday's close, the two-day decline of 561.67 erased all of Thursday's gain and then some.
The S&P 500 index shed 2.6 percent, and the Nasdaqlost 2.3 percent.
"At the end of the day, you've got an economy that's weakening, earnings are declining and the stocks are following that," David Ellison, portfolio manager of FBR's small-cap financial fund, told CNBC. "The question is: At what point are they values to 'buy?' ... I think we still have a ways to go there because we haven't seen the full extent of the economic slowdown."
The weekend meeting of the world's 20 largest economies offered no surprises and had little impact on trading. G20 leaders agreed to tighten lending standards, curb protectionist views and take other measures to help prevent a repeat of the current global financial crisis.
Japan became the latest country to slip into recession, joining the ranks of Hong Kong, Italy and Germany.
Back in the U.S., economists now believe that the economy slipped into a recession in the spring, according to a survey of professional forecasters by the Philadelphia Federal Reserve.
As for the official numbers, the economy is expected to contract 2.6 percentin the fourth quarter and the recession is expected to continue in the first three quarters of next year, according to a survey by the National Association of Business Economists.
Among other economic data: The New York Fed reported its gauge of regional manufacturing activity hit another new low in October, and nationwide, industrial output rose 1.3 percent, more than expected, though that followed the biggest drop in more than 60 years.
Citigroup shares fell 6.6 percent following news that the bank is cutting 53,000 jobs, or 20 percent of its work force, in an attempt to convince investors that it's taking action to get the company back on track.
JPMorgan Chase lost 4.9 percent following a Sunday Telegraph report that the bank is also poised for layoffs and may cut thousands of jobs from its global operations.
Goldman Sachs was also tightening its belt, announcing that top executives would forego their bonusesthis year. Its shares fell 6.4 percent.
Swiss bank UBS followed suit, axing bonuses for its top executives. American depositary shares rose 1.7 percent.
Life insurers are seen as the next group hoping for a piece of the government bailout and many have started scooping up small banks in order to qualify. However, their stocks took a beating as analysts estimate that, even if they get some help for the government, many insurers will still have to find other ways of raising capital.
Genworth Financial said is has applied for TARP funds after announcing last week plans to buy a small Minnesota bank, Interbank. Genworth shares fell 8.8 percent.
That came on the heels of Hartford Financial Services , which announced last week plans to buy Florida-based Federal Trust. Shares of Hartford tumbled 27 percent.
Meanwhile, Congress was preparing to take up the issue of a bailoutfor the troubled auto sector, though partisan bickering may curb any action by year end.
General Motors was the biggest gainer on the Dow, rising 5.7 percent, after the company took action to free up some cash, announcing plans to sell its 3 percent stake in Suzuki Motor, worth $232 million, back to the Japanese auto maker.
Meanwhile, Alcoa was the biggest drag on the Dow, falling 11 percent, after UBS cut its rating on the stock to "neutral" from "buy," citing uncertainty in the aluminum market.
Lowe's shares rose 4.2 percent after the home-improvement retailer reported its profit declined and cut its full-year outlook, a recurring theme in this quarter's retail earnings reports.
Target reported its profit fell for a fifth straight quarter as penny-pinching shoppers flocked to cheaper rival Wal-Mart . The trendy discount chain also temporarily suspended nearly all of its share buybacks and cut capital spending.
Target shares fell 4.1 percent, while Wal-Mart shares skidded 1.7 percent.
Dell shares dropped 3.4 percent after Merrill Lynch downgraded its rating on the computer maker to "hold" from "buy," saying the market for personal computers is deteriorating and it sees no catalysts to boost growth in the next few quarters.