Dow Jones Industrial Average drops over 500 points amid economy anxieties
Gripped by fear of a new recession, the stock market on Thursday suffered its worst day since the financial crisis in the fall of 2008, with the Dow Jones industrial average falling 512.76 points, its ninth-steepest decline ever.

The sell-off wiped out the Dow's remaining gains for 2011. It is down 10 percent from highs in the spring.

Economists said the market fall reflects growing concerns about economic stagnation across the globe.

In trading in Asia early today, Japan's benchmark Nikkei 225 stock average was down more than 3 percent and Hong Kong's Hang Seng shed 4 percent.

Recent reports of slowing factory output, smaller growth in the service sector and tight-fisted consumer spending have reinforced doubts about growth. Analysts say the market is jittery -- not jolted.

"It is a witches' brew," said David Swayze, a Delaware lawyer who was on a state task force that rewrote tax laws when Bank of America merged with MBNA five years ago. "Look left, look right, one does not see any bright light that would suggest that we are really turning things around."

Bill Stone, chief investment strategist for PNC Financial, agreed.

"We are continuing to be bombarded by worries about the global economy," he said.

Across the financial markets, the day was reminiscent of the financial crisis in September and October three years ago. Gold prices briefly hit a record high. Oil fell even more than stocks -- 6 percent, or $5.30 a barrel. And frightened investors were so desperate to get into some government bonds that they were willing to accept almost no return on their money.

Bank of New York Mellon Corp. said it will begin charging its customers a 0.13 percent fee to hold cash deposits over $50 million because it has seen such a large surge in deposits over the last month. The bank, which has $23.6 trillion in client assets under its custody, said customers have moved money to cash as a safe haven in the past month.

"This is a historic precedent in the U.S. banking system," said Dan Geller, executive vice president at Market Rates Insight, a firm that analyses bank pricing. "At some point, the safety and security of an insured cash deposit becomes so appealing that people will be willing to pay a small premium for that."

It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks. The Dow has lost more than 1,300 points, with almost $1.9 trillion in market value evaporated. Thursday's fall was the steepest point decline since Dec. 1, 2008, the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.

Growing concern about the weakening U.S. economy was joined by worry that the troubled economies of Italy and Spain might need help from the European Union.

The European Union has already given financial assistance to help Greece and Ireland pay their debts. A financial rescue package for Italy or Spain might be more than it can handle.

Traders also unloaded stocks before today's release of the government's unemployment report for July, which is expected to show weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.

The report is critical, said University of Delaware economist Ed Ratledge. If it's poor, stocks "will crater again." But even bad news that isn't as bad as investors fear could push stocks upward, he said.

The volume and depth of uncertainty in the economy -- whether it's jobs, housing or equities -- now seem to have instilled a high level of fear, said Donald Puglisi, director of Puglisi & Associates securities analysts and portfolio managers in Newark. Each negative report seems to take on a magnified significance, he said.

"It almost looks like we're getting to the point of some panic selling and some cleansing of the system," he said.

Mark Luschini of Janney Montgomery Scott, said his clients saw the move from stocks into cash as "a parking lot to sort things out."

"With the scars of 2008 still fresh," he said, "some clients don't want to miss the chance to pre-empt further damage."

Other market indicators reinforced the risk-averse mood. Gold, which is seen as a safe investment when the stock market is turbulent, set a record price at $1,684.90 an ounce before falling to finish the day at $1,659. The yield on the one-month Treasury bill fell to almost nothing -- 0.008 percent -- as investors were willing to accept paltry returns in exchange for stable investments.

Steep stock market losses like the ones of the past two weeks can be self-reinforcing. But Kevin Cook, senior stock strategist for Zacks Investment Research in Chicago, said investors' worst fears probably won't come true.

"This is not 2008 again," he said. "We don't have a liquidity crisis. We don't have a credit crisis. This is just profit taking."

Cook said he believes the S&P 500, which closed Thursday at 1,200.07, will trade between 1,150 and 1,250 between now and Oct. 1, at least until investors have enough information to determine whether the economy is in recession again.

Local experts cautioned against panic selling, once again saying the best strategy in stocks is a balanced long-term strategy.

Wealth management advisor Paul Baumbach, of Mallard Advisors in Newark, said selling after stocks have already tumbled is too little too late. There are now bargains to be had, he said.

Even taking into account the recent declines, stocks are still considered to be in an impressive bull market that began March 9, 2009, when the market reached its recession low. The Dow closed that day at 6,547. Since then, it is up about 74 percent.