Dow Plunges 500 Points Amid Economic Angst

Wall Street tumbled again Wednesday as investors worried that the global economy is poised to weaken even as parts of the credit market slowly show signs of recovery. The major indexes fell more than 4 percent, including the Dow Jones industrial average, which fell 515 points.

Corporate profit forecasts, a jump in the dollar and falling oil prices signaled investor fears that an economic slowdown will sweep the globe even if lending begins to approach more normal levels.

The dollar hit multiyear highs against several other major currencies, weighing on commodity prices. That hurt raw materials and energy companies, while giving a boost to airlines. Technology shares fared better than the broader market following quarterly reports from Apple Inc. and Yahoo Inc.

While reduced strains in global credit markets have eased some investors' nervousness about the economy, market anxiety remains as hundreds of companies this week report third-quarter results and issue somewhat murky forecasts that are stirring unease about the economic bumps that may lay ahead.

"In the outlook they are describing to us, things don't look well and they are already announcing that they are laying people off," Art Cashin of UBS Securities told CBS News correspondent Anthony Mason.

Wachovia Corp., which is being bought by Wells Fargo & Co., reported that it swung to a huge loss in the third quarter while the drugmaker Merck & Co. said its quarterly profit fell 28 percent and that it would cut more than 10 percent of its work force.

John Thornton, co-portfolio manager at Stephens Investment Management Group LLC in Houston, said investors' fear has shifted from the immediate concerns about tightness in credit and the resulting difficulty in borrowing to the broader economy as companies come out with their quarterly numbers.

"Even if it weren't for the credit crisis we'd probably be looking toward a pretty tough recession anyway," he said. "The third-quarter earnings are kind of uninspiring but third quarter hasn't been the real concern of people. I think the concern is the depth and duration of the downturn and the effect it's going to have on earnings."

Mason reports that the unemployment rate, now just above 6 percent, could be headed to 7.5 percent, according to a forecast by J.P. Morgan Chase.

"We're looking at a recession which we believe will give us the weakest consumer spending numbers in the post-World War II era," said Bruce Kasman, chief economist at J.P. Morgan Chase.

Americans are already cutting back on gas, reports Mason. Demand over the past month was down more than 4 percent while crude prices continue to plummet, falling more than 50 percent in just three months - from $147 a barrel in July to $66 today, the lowest in 16 months.

According to preliminary calculations, the Dow fell 514.45, or 5.69 percent, to 8,519.21, after being down as much as 698 points in the final half hour of trading. On Tuesday, the Dow retreated 231 points after forecasts from DuPont Co., Sun Microsystems Inc. and Texas Instruments Inc. raised fears about the economy.

Broader stock indicators also fell Wednesday. The Standard & Poor's 500 index fell 58.27, or 6.10 percent, to 896.78, and the Nasdaq composite index fell 80.93, or 4.77 percent, to 1,615.75.

World leaders will gather in Washington on Nov. 15 to discuss the meltdown. Topping the agenda will be a discussion of the underlying causes of the financial crisis and what actions are needed to be taken to keep it from happening again, reports CBS News White House correspondent Mark Knoller.

A senior administration official said Wednesday that the forum will be the first in a series of international meetings to discuss what economists predict could be a long and deep downturn.

For many U.S. companies, the damage has already begun.

Airplane maker Boeing reported its earnings slumped 38 percent as a strike halted production of commercial jets.

Merck & Co. said it will slash 7,200 jobs as part of a new restructuring program. The drugmaker's third-quarter profit plunged 28 percent, partly due to flat sales. Earnings also fell at paper company Kimberly-Clark Corp., insurer WellPoint Inc. and drug developer Wyeth.

"We are going into what is very clearly a recession mode," Blake Jorgensen, Yahoo's chief financial officer, said in a Tuesday interview. Yahoo is slashing 1,500 jobs while it braces for a deep downturn likely to extend well into 2009.