US stocks plunged on Thursday, with the broadbased Standard & Poor's 500 Index losing 6.7 per cent to close at its lowest point since 1997 and economic indicators signalling a recession.
The S&P 500 has dropped 49 per cent this year and is poised for its worst annual decline in its 80-year history.
The New-York-based private Conference Board's index of leading economic indicators - a key gauge of US economic performance - declined 0.8 per cent in October after rising a revised 0.1 per cent in September. It marked the third drop in the last four months, signalling that the world's largest economy is headed for a recession.
Since April the index, which measures economic performance over the next three to six months, has dropped 2.4 per cent - twice the pace of the six previous months. The gauges "are now decreasing at rates last seen in 2001" when the US was last in recession, the board said.
The blue chip Dow Industrial Average fell 444.99 points, or 5.56 percent, to 7,552.29. The Standard & Poor's 500 Index lost 54.14 points, or 6.71 percent, to 752.44. The technology-heavy Nasdaq composite index shed 70.30, or 5.07 percent, to 1,316.12.
The US currency rose to 80.20 euro cents from 79.87 euro cents on Thursday. Against the Japanese currency, the dollar fell to 93.93 from 95.95.
The fate of the US automakers also contributed to dragging stocks down. On Thursday, congressional leaders charged the three ailing US automakers to present a detailed "path to viability" plan before the companies can get their hands on a $25-billion emergency loan from the government.
General Motors Corp, Ford Motor Co and Chrysler LLC have said they may soon file for bankruptcy if they don't get a government cash infusion, and warned that the failure of just one of the so-called Big Three could have disastrous consequences for the US economy.
But efforts to get them emergency funds stalled in Congress this week as Republicans and some Democrats voiced skepticism that the US auto industry was really capable of being rescued after a decade of refusing to modernize and improve fuel efficiency.
The three automakers will have until Dec 2 to come up with a more detailed plan for what they intend to do with a $25-billion infusion. Congress may come back into session a week later to reconsider the issue, Reid said.