NEW YORK – Wall Street tumbled Monday, joining a selloff around the world, as fears grew that the financial crisis will cascade through economies globally despite bailout efforts by the U.S. and other governments.
The credit market remained under strain, and investors piled into government bonds. The Dow Jones industrials skidded more than 300 points and fell below 10,000 for the first time in four years.
The markets have come to the sobering realization that the Bush administration's $700 billion rescue plan won't work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash.
Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.
The governments of Germany, Ireland and Greece also said they would guarantee bank deposits.
The Federal Reserve also took fresh steps to help ease seized-up credit markets. The central bank said Monday it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.
"These programs are going to be effective I believe," said Rob Lutts, chief investment officer at Cabot Money Management. "Shorter term we're in a very challenging environment that's going to take a while."
In the first hour of trading, the Dow Jones industrial average fell 336.43, or 3.26 percent, to 9,988.95, dropping below 10,000 for the first time since Oct. 29, 2004.
Broader indexes also tumbled. The Standard & Poor's 500 index shed 40.26, or 3.66 percent, to 1,058.97; and the Nasdaq composite index fell 77.35, or 3.97 percent, to 1,870.04. The Russell 2000 index of smaller companies dropped 22.30, or 3.60 percent, to 597.10.
In Asia, the Nikkei 225 closed 4.25 percent lower. Europe's stock markets also declined, with the FTSE-100 down 3.24 percent, Germany's DAX down 5.28 percent, and France's CAC-40 down 5.60 percent.
The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill slipped to 0.38 percent from 0.50 percent late Friday. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.
Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.52 percent from 3.60 percent late Friday.