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NEW YORK : US stocks ended sharply lower on Wednesday on anxiety about the credit market, despite the Federal Reserve's seven-billion-dollar cash infusion to support the financial system.
The Dow Jones Industrial Average shed a heavy 167.45 points (1.29 percent) to end at 12,861.47.
It was the fifth straight closing loss for the blue-chip index and the first time since late April it closed below 13,000.
The Dow has lost more than 1,000 points since topping 14,000 points for the first time almost a month ago, on July 19.
The tech-heavy Nasdaq composite fell 40.29 points (1.61 percent) to 2,458.83, while the broad-market Standard & Poor's 500 index lost 19.84 points (1.39 percent) at 1,406.70.
The major indices roller-coastered through volatile trading, ending with a nose-dive as investors bailed out in the face of the unknown scope of the financial market distress.
European and Asian stocks plunged after Wall Street shares closed on Tuesday with heavy losses.
"Anything even remotely bearish is creating an oversized reaction given the nervous underlying tone in the market," said Dick Green, an analyst at Briefing.com.
The Federal Reserve intervened amid the market volatility on Wednesday, pumping an additional seven billion dollars into the financial system to loosen credit.
The Fed has now interjected 69 billion dollars into the markets since Thursday and said it "stands ready" to take further action as needed.
Adding to the pressure was Wednesday's deadline for many hedge fund investors to file redemption requests for the third quarter, analysts said.
Briefing.com analysts wrote: "We don't believe this is a time to try to pick a market bottom because volatility remains extremely high and tightening credit standards continue to undermine the basic market fundamentals."
But John Praveen of Prudential Global Investment Strategy said the credit jitters seem exaggerated, given the health of the economy.
"Fears of a systemic failure of financial markets appear to be overblown. Continued solid macro, earnings and valuation fundamentals are likely to lead to stock gains once credit markets stabilise," Praveen said.
Oil prices, meanwhile, surged higher on concern that storms brewing in the Atlantic could threaten US oil infrastructure and after the government reported that crude reserves fell for the sixth week in a row.
On the inflation front, the Labour Department said US consumer prices were tamer in July, in line with most Wall Street analysts' forecasts.
Its consumer price index rose 0.1 percent after a 0.2 percent gain in June, as a decline in energy costs last month helped contain price rises.
Among stocks in view, the leading US mortgage lender, Countrywide Financial, which last week warned of "unprecedented disruptions" in its sector, plunged 12.96 percent to 21.29 dollars after being downgraded by Merrill Lynch.
Financials again took a beating: Morgan Stanley lost 1.65 percent to 56.63 dollars, Goldman Sachs dropped 2.86 percent to 164.90, Lehman Brothers shed 3.91 percent to 51.57 and Merrill Lynch fell 3.36 percent to 68.94.
Elsewhere, food and snacks company Sara Lee dipped 0.44 percent to 15.93 dollars after reporting a 9.1 percent rise in annual net profit, to 504 million dollars.
AirTran Airways plummeted 5.02 percent to 9.83 dollars. The low-cost carrier raised its offer to buy Midwest Airlines by 50 cents per share to 16.25, saying it acted at the request of Midwest shareholders who are unhappy with a rival 16-dollar-a-share bid from private equity firm Texas Pacific Group. Midwest gained 5.30 percent to 14.70 dollars.
Short-term bonds strengthened amid the market churn, with the yield on the 10-year Treasury bond falling to 4.706 percent from 4.732 percent on Tuesday.
The yield on the 30-year Treasury, however, climbed to 5.009 percent from 4.987 percent. Bond prices and yields move in opposite directions. - AFP/de
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