Dow Sheds 300 Points as Global Recession Fears Escalate

Stocks spent much of Thursay's session deep in the red as investors ditched risky assets a day after the Federal Reserve gave a bleak assessment of the U.S. economy.

The Dow Jones Industrial Average plunged as much as 528 points at its lowest point near the end of the session, but pared some of its losses to close down by 391 points, or 3.5%, to 10,734. The S&P 500 lost 37 points, or 3.2%, to finish at 1130, and the Nasdaq closed off by 83 points, or 3.3%, at 2456.

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Global markets soured after the Fed pointed to "significant downside risks to the economic outlook" and sluggish economic growth as justification for its plan to sell some short-term securities and buy $400 billion in longer-dated Treasurys on Wednesday. The strategy, known as "Operation Twist" is designed to lower long-term interest rates in the hopes of encouraging economic activity. The central bank also plans to bolster mortgage markets by reinvesting proceeds of maturing loans into new mortgage-backed securities."Mortgage rates are not the problem; we need jobs," said RealMoney contributor Ed Ponsi in a recent blog post. "We need to let go of this fantasy that the Fed can fix the economy, or that the government can create jobs. Bernanke isn't Superman. The Fed can't fix the economy, just like the government can't create jobs. You can't repeal the economic cycle, and our attempts to do so have only prolonged the misery," he said.On Thursday, yields on the benchmark 10-year Treasury were well below the 2% level. Prices on the 10-year note rose 1 13/32, diluting the yield to 1.716%. The 30-year bond rose 4 16/32, lowering the yield to 2.791% and prices on the 2-year note remained flat, with a yield of 0.207%.The dollar was rising against a basket of currencies, with the dollar index up 0.9%.Thursday's risk-averse environment battered oil prices. The November crude oil contract shed $5.41, or 6.3%, to settle at $80.51 a barrel.Oil-related equities also sunk. Exxon Mobil(XOM) and Chevron(CVX) each closed down by at least 4%. Marathon Oil(MRO) dropped 7.1% to $22.05.Gold for December delivery lost $66.40, or 3.7%, to settle at $1,741.70 an ounce. Investors also have to wait until next week to see whether Greece will get additional financial support when a group of representatives from the European Commission, the European Central Bank and the International Monetary Fund returns to Greece to assess whether criteria for the next bailout have been met. If the country doesn't receive its next tranche of bailout funds by October, it will likely default on its debts.Adding to uncertainty in the eurozone on Thursday was a survey from financial information company Markit that suggested potential recessionary conditions. Markit's monthly purchasing managers index fell below the growth level of 50 in September, dropping to 49.2 from 50.7 in the previous month. Any reading below 50 indicates contraction.The FTSE in London dropped 4.7%, and the DAX in Frankfurt sunk by 5%. In Asia, an initial reading on Chinese manufacturing also suggested a contraction in September. HSBC's preliminary China Manufacturing Purchasing Managers index slipped to a reading of 49.4 in September from August's level of 49.9.Hong Kong's Hang Seng plunged 4.9%, and Japan's Nikkei lost 2.1%

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The latest jobs data continued to paint a bleak picture of the labor market as the level of people filing for unemployment benefits for the first time fell by less than economists had been expecting.

The Labor Department said initial jobless claims fell by 9,000 to 423,000 in the week ended Sept. 17, missing expectations for a decline of 10,000 to 418,000.

One bright spot was the Conference Board's leading indicators report, which showed no signs of recession. The Conference Board said leading indicators inched 0.3% higher in August, topping expectations for growth of 0.1%, and extending a positive trend from the last three months. In July, leading indicators climbed 0.5%.In other economic data, the Federal Housing Finance Agency said housing prices rose 0.8% in July after growth of 0.9% in June.Materials and energy stocks led the declines as market watchers expressed concern about what a global economic slowdown would do to demand for raw materials.Alcoa(AA), DuPont(DD), and Caterpillar(CAT) were among the Dow's biggest laggards during a session that saw 87% of the 5.3 billion shares trading on the New York Stock Exchange decline. Only 12% rose. On the Nasdaq, 2.2 billion stocks changed hands.Verizon(VZ), Kraft Foods(KFT) and Intel(INTC) showed the best performances on the Dow. In corporate news, Hewlett-Packard(HPQ) is apparently replacing CEO Leo Apotheker with former eBay(EBAY) chief Meg Whitman. The stock declined 4.9% to $22.80.FedEx(FDX) reported first-quarter earnings that topped analysts' expectations by a penny at $1.46 a share and said earnings rose 22% even though demand for global flights fell. The stock lost 8.2% to $66.58.United Technologies(UTX) said late Wednesday that it reached a deal to acquire Goodrich(GR) for $127.50 a share in cash. The deal, which totals $18.4 billion, including $1.9 billion in net debt, represents a 16% premium to Goodrich's Wednesday closing price. Goodrich's stock surged 10.1% to $120.56 while shares of United Technologies slipped 8.8% to $68.31. .

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