NEW YORK - US shares plunged to fresh five-year lows Thursday in a vicious late-date selloff as jitters intensified over the global financial crunch.

The Dow Jones Industrial Average plunged 678.91 points (7.33 percent) to end at 8,579.19, the seventh straight loss for the Wall Street index and the first close below 9,000 since 2003.

The Nasdaq slumped 95.21 points (5.47 percent) to 1,645.12 and the Standard & Poor's 500 index retreated 75.02 points (7.62 percent) to 909.92.

The market was gripped by panic in a late selloff that accelerated with traders uneasy about global efforts to battle a credit crunch that has led to a financial firestorm.

"Continued nervousness about the economy and the inability of the Fed and the Treasury to break the logjam in the credit markets is pumping up the pessimism," said analysts at Charles Schwab & Co.

"This cascading waterfall selloff is ugly," said Barry Ritholtz at Ritholtz Research.

"Where do we go next -- are we close enough to a bottom to buy, or are we heading much lower?"

The huge selloff came ironically a year after the Dow had hit a record high of 14,164.53, marking a 39 percent tumble over the past 12 months.

Ritholtz said some of the jitters may be linked to a big settlement date for contracts from Lehman Brothers, the Wall Street giant that went bankrupt last month, with considerable confusion on how the market would price the assets.

Analysts at Bespoke Investment Group noted that US regulators as of Thursday had lifted a temporary bank on "short" sales that allow investors to bet on declining share prices.

"Credit markets are still frozen and banks have the exact same problems that they had the day before the 'No Short' rule" was lifted, the analysts noted.

Analysts said the market was being driven by fear and panic amid a global banking crisis that showed little signs of easing.

"The stock market has now moved into very deeply oversold territory. Virtually every technical indicator we follow is strongly signaling an oversold market ripe for a rebound," said Fred Dickson at DA Davidson & Co.

"That said, we need to see something positive happen in the credit markets for buyers to step in and sellers to stand aside. At some point, we expect the tidal wave of hedge fund-related selling to subside, although theoretically it could continue for several more weeks."

Chris Lafakis at Economy.com said sentiment remained fragile.

"The credit markets are still broken," he said.

"Wednesday's concerted interest rate cuts by policymakers in the US and around the globe have failed to ease banks' concerns about one another's solvency."

Investors mulled news that US authorities were eyeing the possibility of direct capital injections to troubled banks as a means of shoring up a fragile system.

Such a move, already announced by British authorities, would give the government special shares of the banks in exchange for helping boost badly needed capital in an effort to unclog credit markets, analysts said.

John Ryding at RDQ Economics said such a move would help stabilize the banking system and go a long way toward easing the crisis.

"If Treasury Secretary Henry Paulson follows (British officials') advice, we could finally have found our wider firebreak," he said.

Financial shares remained in focus. JPMorgan Chase fell 6.7 percent to 36.68 dollars and Bank of America slid 11.2 percent to 19.63 dollars.

Wachovia slid 28.6 percent to 3.60 dollars a day after the two suitors for the troubled bank agreed to extend negotiations. Citigroup lost 10.2 percent to 12.93 dollars and Wells Fargo tumbled 14.5 percent to 27.75.

General Motors tumbled 31 percent to 4.76 dollars after Standard & Poor's raised questions about the auto giant's liquidity. Ford plummeted 21.8 percent to 2.08 dollars.

Bonds fell. The yield on the 10-year US Treasury bond rose to 3.834 percent from 3.715 percent Wednesday and that on the 30-year bond increased to 4.120 percent against 4.063 percent. Bond yields and prices move in opposite directions.

- AFP /ls