Wall Street Sinks, Dow Closes Well Below 9000

For the day at least, GM was one of the biggest losers on the Dow, plunging 29% to $5.02, its worst print in more than five decades. Partly to blame was a decision by S&P to put the automaker and GMAC on CreditWatch Negative.

"Are we at a bottom or at a point of capitulation or despair? I don't know. It could get worse before it gets better," said Brian Gendreau, investment strategist at ING Investment Management.

Financial stocks were holding the spotlight as a three-week ban on short-selling of stocks in the sector lifted just before midnight. The Securities and Exchange Commission had implemented the rule on Sept. 19 as an emergency measure to help stem massive selling in bank stocks.

Morgan Stanley (MS Quote) shares fell 26% to $12.45, and Goldman Sachs (GS Quote) plummeted 10% to $101.35.

Citigroup and Wells Fargo (WFC Quote) appeared stuck in their battle over a buyout of Wachovia (WB Quote). Negotiations between Citi and Wells, the potential acquirers were stagnating over how to divide Wachovia's assets.

Citi shares dropped 10% to $12.93, Wells plummeted 17% to $26.49 and Wachovia took a 29% hit to $3.60.

Meanwhile, The Wall Street Journal reported that National City (NCC Quote) was in discussions with other banks, perhaps PNC Bank (PNC Quote) or Bank of Nova Scotia (BNS Quote) about potentially selling itself.

National City finished down 3.6% to $2.15, while PNC gave back 12% to $59.85 and Bank of Nova Scotia dropped 11% to $35.95.

Insurance firms were also facing investor scrutiny after MetLife (MET Quote) earlier this week said it wasn't offering earnings guidance and intended to raise capital. Shares of Prudential Financial (PRU Quote) tumbled 23% to $33.27.