(Updated from 4:03 p.m. EST)

The

Dow Jones Industrial Average closed below 10K.

The good news: The Dow -- which has made several attempts to rally today -- closed off its lows of the day. The bad news: the

blue-chip index was still down more than 300 points and below the 10,000 mark for the first time since October 2000. The

Nasdaq Composite Index, which is already trading nearly 60% off its all-time highs, finished off 43 to 1972.

Rumors that the

Bank of Japan

is in emergency talks with a large financial institution and news that 19 Japanese banks were put under negative review at credit rating agency

Fitch

, coupled with an earnings downgrade on European banks by

Goldman Sachs

, sent global markets on a downward spiral and has put pressure on stocks in the U.S.

If Only It Was Just Beef Europe Had to Worry About

Rocked by the global markets scare, the European indices finished down sharply. London's

FTSE 100

ended down 125, or 2.2%, to 5596 -- its lowest close since Dec. 1998. Germany's

Xetra Dax

was also hit hard, lower by 113, or 2%, to 5127. And Paris'

CAC-40

lost 60, or 1.2%, to 5127. Traders have been talking about massive selling from a hedge fund, yet unknown, that was long European stocks.

On the back of today's events overseas and at home, market watchers foresee steeper interest rate cuts from the

Federal Reserve to get the economy back on track. The majority of economists had been expecting the Fed to drop the

fed funds rate by 50 basis points to 5% when it meets on Tuesday, but the

fed fund futures contract, a good proxy for monetary policy, is now pricing in a 50% chance for a 75-basis point interest rate cut.

For his part, Tony Crescenzi, chief bond market strategist at

Miller Tabak

, said he would not be surprised if the Fed cut rates by more than 75 points next week since the global pain signals potential systemic weakness. "The Fed can't sit back and allow confidence to deteriorate," he said. Crescenzi does not rule out the possibility of a rate-ease before Mar. 20. "The fact that they prefer to act at meetings doesn't mean they won't cut rates before, as Greenspan showed us back in January."

Capitulation?

According to Crescenzi, today's volume levels do not suggest capitulation -- a selling spree momentous enough to take stocks down so low that they look cheap again. The last time that happened was Sept. 1, 1998. On that day, the Dow Jones hit rock bottom, or 7,400, on volume of 1.2 billion shares -- twice the six-month volume average on the

New York Stock Exchange and then came back to close at 7,827. If that kind of rally were to take place today, by those standards, volume levels would have to rise above 2 billion shares.

The roster of stocks getting hit spreads far and wide. To be sure, bank stocks were smacked by the selloff: Before the close, the

Philadelphia Stock Exchange/KBW Bank Index

, which tracks large banks, was down 5.5%.

Bank of America

(BAC) - Get Report

was losing 4.5% to $51.01,

J.P. Morgan Chase

(JPM) - Get Report

fell 7.2% to $44, and

Citigroup

(C) - Get Report

sank 6.5% to $45.25.

Every single Dow stock ened down. Big drags on the blue-chip index were

United Technologies

-- down 5.4% to $75 before the close -- and

IBM

(IBM) - Get Report

, down 4.5% to $94.09.

Besides IBM, other tech stocks suffering today included

Microsoft

(MSFT) - Get Report

, which earlier was shedding 1.4% to $53.44,

Cisco

, decreasing 6.2% to $20.06, and

Intel

(INTC) - Get Report

, sliding 2.6% to $28.56.

More Earnings Warnings

Amid weakening fundamental conditions across the economy, earnings warnings have become the rule rather than the exception. According to earnings tracker

First Call/Thomson Financial

, close to 500 companies have issued profit warning this preannouncement season. For many CEOs, the problem remains a lack of visibility about their financial future.

The latest:

McDonald's

(MCD) - Get Report

scaled back its 2001 earnings-per-share estimate due to problems in Europe caused in part by outbreaks of mad cow disease and foot-and mouth-disease. In recent trading, McDonald's was lower by 2.8% to $27.01.

Insurer

MetLife

(MET) - Get Report

said after the close of regular trading yesterday that its fiscal first-quarter and full-year earnings would fall below expectations, due to bad weather in the Northeast and Southeast. It lost 0.9% to $27.55.

Shares of

Lucent

(LU)

fell 2% to $11 after the company said it's considering selling or merging its optical fiber business,

Optical Fiber Solutions.

Among those thought to be interested in bidding for the company are

Corning

(GLW) - Get Report

, France's

Alcatel

(ALA)

, earlier down by 4.6% to $35.30,

JDS Uniphase

(JDSU)

and Italy's

Pirelli

.