Economic concerns deepen

The Dow finished down 92.65 points, or 0.8%, to 10,962.54.

"It was a day of ugliness," said Georges Yared, chief investment strategist at Yared Investment research in Minneapolis. "What else can you say?"

In dollar terms, crude oil recorded its biggest drop since 1991 amid fear that the weakening economy would cause demand to fall precipitously. Prices slumped almost 5%, sinking $6.44 to $138.74 a barrel. But analysts drew scant comfort from the decline, convinced that it was stimulated by declining confidence in the U.S. economic outlook.

That assessment was reinforced when the dollar briefly fell to a new low against the euro.

Elsewhere, the latest report on producer prices -- what manufacturers and other producers pay for the materials they buy -- showed inflationary pressures continuing to build.

Wholesale prices jumped a larger-than-expected 1.8% in June, their sixth consecutive rise. The increase was propelled largely by higher fuel prices. Wholesale inflation has swelled 9.2% over the last year, the largest 12-month increase since 1981.

Retail sales inched up a less-than-expected 0.1% in June as car sales fell. The lackluster sales gain stoked fear that the consumer spending surge that was created by the government's economic-stimulus program is petering out now that most checks have been distributed to taxpayers.

Shares of battered mortgage-finance companies resumed their slides, with Fannie Mae dropping 27% and Freddie Mac slumping 26%.

The glum mood pervading Wall Street evoked gallows humor among some. "Get away from that window," James Paulsen, chief investment strategist of Wells Capital Management, wrote in a note to clients. "Don't jump just yet!!!"

The Securities and Exchange Commission also took a surprise step to prop up the stocks of Fannie Mae and Freddie Mac as well as those of 17 financial-services companies.

The SEC announced it was cracking down on the use of a trading strategy in which investors sought to profit from drops in the stock prices. The move initially applies only to those 19 stocks, but the SEC said it was contemplating an expansion to the entire market.

The move is a part of a stepped-up effort to enforce longstanding rules governing so-called short selling. It follows an SEC announcement Sunday that it was investigating whether certain traders were spreading false rumors to manipulate stock prices.