Stocks closed sharply lower, led by financials after comments from JPMorgan CEO Jamie Dimon on the fourth quarter and as investors worried about the fate of the auto bailout.
The Dow Jones Industrial Average finished down nearly 200 points, or 2.2 percent, while the S&P 500 index lost 2.8 percent and the Nasdaq tumbled 3.7 percent.
JPMorgan was the biggest decliner on the Dow, falling more than 10 percent after CEO Jamie Dimon told CNBC that the bank had a "terrible" November and December, blaming the "normal culprits"—mortgages, credit, and high-yield bonds and loans.
Bank of America and General Motors also fell more than 10 percent, rounding out the bottom three Dow performers.
US Bancorp shares fell 10 percent after the bank warned that the fourth quarter is likely to bring a jump in bad loans.
Shares of Ford lost more than 10 percent, as the proposed $14 billion bridge loan to the Big Three was approved by the House, but faces opposition in the Senate.
From 'Mad Money':
The perceived success or failure of the auto bailout, "quite frankly is what's going to make or break the near-term for this market environment. We're watching history unfold," Charles Lemonides, founder & chief investment officer of ValueWorks LLC, told CNBC.
Meanwhile, Dow component Procter & Gamble slipped after the company, which makes everything from Gillette razors and Pampers diapers, trimmed its sales outlook.
Boeing, also a Dow component, lost 3.4 percent after the aerospace giant said it was delaying the first flight of its Dreamliner 787until the second quarter of 2009 and won't ship its first delivery until the following year.
Boeing attributed the delay to this year's machinists strike and production problems.
Eli Lilly rose 1.7 percent, though the drug maker projected that 2009 results would be hurt by its acquisition of ImCloneand weaker foreign currencies.
Who knows if it helped, but, for the second time in as many months, Lilly CEO John Lechleiter called the company's stock price "ludicrous"-- something you don't hear every day from the head of a big drug company.
Big-box retailer Costco Wholesale's quarterly profit rose slightly as strong results from its gasoline stations helped to offset weak consumer demand for all but the most essential household items. Shares fell 3 percent.
In economic news, the number of U.S. workers filing new claims for jobless benefits surged to a 26-year highlast week, the Labor Department reported, as a deepening recession forced employers to cut back on hirings. And import prices saw their largest monthly decline on record in November and the U.S. trade deficit widened unexpectedly in October.
The bleak outlook for the economy led consumers to cut their spending in November as U.S. retail sales excluding autos posted their biggest monthly drop in five years.
On the road to the White House, President-elect Barack Obama will nominate Steven Chu as his energy secretary, according to NBC News. Chu is currently director of the Lawrence Berkeley National Laboratory and was a recipient of the 1997 Nobel Prize in physics.
Energy remained in focus as the price of oil made firm gains ahead of the open after the International Energy Agency said global demand would grow in 2009.
Crude oil rose more than $3, trading between $46 and $47 a barrel.
Still to Come:
FRIDAY: PPI; retail sales; consumer sentiment; business inventories
Send comments to email@example.com.