NEW YORK — More glum news on consumer spending and a reversal in the Treasury Department's plan to buy troubled mortgage-related debt from the country's banks combined to drive the stock market to its third straight loss Wednesday.
The Dow Jones industrial average sank more than 400 points as it and other major stock indexes fell about 5% to near or below their Oct. 27 lows, which investors had hoped would serve as a floor under stock prices.
Oil prices continued their long slide, closing in on the $55 level, in response to the bleak global economic outlook. But that piece of good news for consumers failed to console investors rattled by an ominously worded warning from electronics giant Best Buy Co., which said a "seismic" drop in consumer spending had created "the most difficult climate we've ever seen."
The bluntly downbeat earnings forecast from the leading electronics retailer followed a recent wave of bad news from other consumer-oriented companies such as Starbucks Corp., MasterCard Inc. and major automakers.
The gloomy reports have highlighted the degree to which a precipitous decline in consumer spending, which has accounted for more than two-thirds of U.S. economic activity, is imperiling the economy.
"The signs continue to point to a slowing economy," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Ore. "Best Buy was the punctuation mark at the end of a long stick that said, 'This is real.' "
The Dow sank 411.30 points, or 4.7%, to 8,282.66. The blue-chip indicator is just 100 points above its Oct. 27 close of 8,175.77, its lowest level in 5 1/2 years.
The Standard & Poor's 500 index fell 46.65 points, or 5.2%, to 852.30. It is barely three points above its recent low.
The Nasdaq composite index hit a new trough, slumping 81.69 points, or 5.2%, to 1,499.21.
On the New York Stock Exchange, only one stock rose for every 11 that fell.
General Motors was the only stock that gained among the Dow's 30 components as congressional Democrats drafted legislation to send rescue funds to Detroit's automakers. GM rose 16 cents to $3.08, while Ford Motor gained 4 cents to $1.84.
The financial sector was beaten down after Treasury Secretary Henry M. Paulson said his department was ditching its plan to purchase troubled assets from banks -- the centerpiece of the government's original $700-billion bailout plan -- in favor of injecting capital directly into financial institutions.
