Economic Blues Sink Blue Chips 337 Points

September business inventories declined 0.2%, showing a greater decrease than economists had expected. The August reading was also revised downward from 0.2% from 0.3%, according to the Census Bureau.

A preliminary November consumer-sentiment survey from the University of Michigan showed an index reading of 57.9, above the consensus estimate and slightly above October's reading of 57.6.

Although consumer confidence has held its ground, Cardillo said, "There was certainly no shift to the upside, which means that consumers are very concerned."

As the day's trading began, new signs emerged of the credit troubles that are continuing to rock the ailing financial sector. The Wall Street Journal reported that Citigroup (C Quote) is gearing up to cut 10,000 jobs and raise interest rates on many credit-card customers.

Elsewhere among financials, Dexia SA is getting set to sell its bond-insurance segment FSA Holding to Assured Guaranty (AGO Quote), shares of which added 4.6% to $8.47. Meanwhile, the BBC reported that the Royal Bank of Scotland (RBS Quote) is eliminating 3,000 jobs over the next several weeks. Shares dropped 5% to $15.37.

Meanwhile, Federal Reserve Chairman Ben Bernanke spoke at the European Central Banking Conference. Bernanke said that turmoil in the financial system has warranted international help and that markets remain severely strained. His speech comes as world leaders prepare for a summit in Washington over the next couple of days to discuss the worldwide financial meltdown.

Ahead of the meeting, the U.S. government was rolling out several new initiatives to alleviate the crisis. The FDIC released details of a plan to use $24.4 billion to guarantee 2.2 million mortgages, thereby helping some 1.5 million Americans stay in their homes.