Wall Street Sinks, Dow Closes Well Below 9000

MetLife, however, was buoyed by a report in the Journal that it has recently discussed a potential merger with Hartford Financial (HIG Quote). The report said the discussions didn't lead to a deal, but that they indicate the strain the credit crunch has exacted from insurance firms. MetLife added 3.7% to $28, while Hartford lost 19% to $20.11.

Separately, the Fed said it would grant insurance company AIG (AIG Quote) up to $37.8 billion in exchange for fixed-income securities. The cash infusion comes on top of the $85 billion already lent out in September to keep the company from going bankrupt. AIG dropped 25% to $2.39.

Looking at corporate earnings, Dow component IBM (IBM Quote) preannounced its third-quarter results, saying it made a profit that increased year over year and topped analyst estimates. Shares ticked down 1.7% to $89.

As for economic data, initial jobless claims for the week ended Oct. 4 came in at 478,000, down from 498,000 the previous week but slightly above economists' estimates for 475,000 jobs lost.

The Commerce Department reported that wholesale inventories for August were up 0.8%, a larger increase than anticipated by economists.

In commodities, crude oil was losing $1.64 at $87.31 a barrel. Gold declined $20 to settle at $886.50 an ounce.

Longer-dated U.S. Treasury securities were declining in price. The 10-year note was down 1-6/32 to yield 3.78%, and the 30-year was down 30/32, yielding 4.1%. The dollar was gaining ground on the yen and pound, but softening and euro.

Overseas, European indices, such as the FTSE in London and the DAX in Frankfurt, were mostly lower. Asia was mixed, as the Nikkei in Japan closed on the downside while the Hang Seng in Hong Kong finished with gains.