Investors who pushed the world's stock markets off another cliff Friday are increasingly convinced that a global recession is afoot despite unprecedented steps by governments to thaw frozen credit markets.
Some on Wall Street are looking to Washington for even further action -- possibly including another huge spending package.
Signs of economic contraction came Friday from several continents, providing fresh evidence that the meltdown that originated in the collapsing U.S. housing market is having repercussions all over.
Britain reported its first decline in economic output since 1992, while Japan's Sony and German carmaker Daimler reported bad news about their earnings. In the U.S., Chrysler said it was laying off a quarter of its white-collar staff.
High-profile U.S. companies such as Microsoft and Amazon.com have offered gloomy near-term outlooks for their businesses.
Key stock indexes plunged almost 10% in Tokyo, 8% in Hong Kong, 7% in Sao Paulo, Brazil, and 5% in London and Frankfurt, Germany.
In the U.S., the Dow Jones industrial average sank 312.30 points, or 3.6%, to 8,378.95, capping a volatile week and putting the blue-chip gauge on track for one of its worst months ever, with a decline of 23% thus far in October.
The economic gloom sent the price of oil down $3.69 to $64.15 a barrel, its lowest price in 16 months, on the expectation that energy demand from consumers and businesses will sink.
Stock investors consoled themselves with the thought that Friday's losses on Wall Street could have been steeper. The Dow dropped more than 500 points soon after the opening bell before erasing some of that decline.
"It feels weird to say you feel good about a day when you're down" that much, said Michael Mullaney, portfolio manager at Fiduciary Trust Co. in Boston. "But that's the way things are now."
The unrelenting bear market has some investors hoping that another interest rate cut by the Federal Reserve next week will help bail out their sinking portfolios. Some on Wall Street are calling for even bolder action.
"A large fiscal stimulus package of $300 billion to $500 billion appears to be required to prevent an even deeper economic slump than the one we're now forecasting," analysts at Goldman Sachs wrote in a report to clients Friday.
Meanwhile, as the federal government follows its purchase of minority stakes in large U.S. banks with a round of capital infusions for smaller institutions, the Treasury Department is reportedly considering buying stock in insurance companies as well.
A trade association of financial services companies on Friday asked the department to add to the program not only insurers but also brokerage companies and even Detroit carmakers.
The Standard & Poor's 500 index of stocks of large U.S. companies is down 44% from its all-time high a year ago. That's within sight of the 49% drop the index suffered during the tech-stock bust of 2000-02. Most foreign markets are down even more sharply.
"For the first time in this process, there is so much uncertainty, clients are thinking that maybe their money should be in a can in the backyard," said Martin von Kanel, a certified financial planner with Patriot Wealth Management in Torrance.
"A client in his 40s called today and said, 'Marty, go to cash. I can't take it anymore.' "
Whether investors get any relief next week remains to be seen. As shown by the trading in instruments known as interest-rate futures, Wall Street is betting that the Fed will slash its benchmark interest rate to 1% from 1.5% on Wednesday in an effort to boost lending and spur economic growth. That would put the rate at its lowest level since June 2004.
Whether a Fed cut would do much good with the financial crisis making many loans hard to get at any interest rate is debatable.
And some analysts warn that because Wall Street is already expecting a rate reduction, investors aren't likely to see jubilation in the stock market if the Fed takes that step.
"We may get a one-day spike in stock prices," said John Buckingham, chief executive of Al Frank Asset Management in Laguna Beach. A rate cut "is already baked into the cake."
The economic slowdown has been evident in the flood of third-quarter corporate profit reports that have helped roil stock prices the last two weeks. Earnings are down an average of 23% for companies in the Standard & Poor's 500 index that have reported so far.
Investors will get their first look at how the overall U.S. economy performed in the third quarter when the government releases its preliminary estimate of the country's gross domestic product Thursday.
Several major companies are slated to release financial results next week, including Exxon Mobil and Chevron, whose shares have been hit by the commodity's sliding price. Reports due from consumer products companies Procter & Gamble and Colgate-Palmolive and cruise ship operator Royal Caribbean could provide fresh insight into the effect the weak economy and the depressed stock market are having on consumer spending.
Despite Friday's losses, some analysts were relieved that the selling was less panicky than had been indicated before the stock market opened by a plunge in prices of Dow futures, which enable investors to bet on where the 30-stock index will trade. The drop was so severe that trading in those instruments was halted.
"When I saw the futures this morning, I was afraid the Dow was going to be down 1,000 points," said John Lynch, chief market analyst at Evergreen Investments in Boston. "But the market really showed tremendous resilience."