Economic Blues Sink Blue Chips 337 Points

The President's Working Group on Financial Markets, meanwhile, offered a plan to improve regulation of derivatives and credit default swaps. The plan included a provision for the Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission to share information on the market for credit default swaps.

At a time when financial and consumer firms were facing difficulties offering credit to customers, the Journal reported that software behemoth Microsoft (MSFT Quote) would offer 0% financing for clients who spend $20,000 to $1 million on its customer-management and accounting software. The stock slipped 5.6% to $20.06.

In the earnings department, Freddie Mac (FRE Quote), the mortgage company that has been among those central to the credit crisis, announced a $25.3 billion third-quarter loss. Shares dropped 8.2% to 67 cents.

Retailers were also showing signs of weakness. Department-store operator Kohl's (KSS Quote) reported declining profit and cut its full-year guidance. Nordstrom (JWN Quote) also cut its earnings outlook. Kohl's shares tumbled 4.8% to $29.09, and Nordstrom lost 9.4% to $11.74.

J.C. Penney (JCP Quote) said its profit dropped 53% year over year, and the department-store operator guided below analysts' estimates. Shares plummeted 10% to $17.27.

As for analyst actions, UBS lowered its rating on European pharmaceutical firm GlaxoSmithKline (GSK Quote) to neutral from buy, citing valuation. The stock edged down 2.6% to $36.25.

Beyond earnings statements, Finnish cell phone firm Nokia (NOK Quote) said it expected industrywide sales volumes to decline as the economy weakens and currencies remain volatile. Shares fell 11% to $12.64.