Updated from 4:06 p.m. EDT

A storm of fear and dread hit stocks in New York Thursday, as tight credit markets and pessimism regarding the financial sector walloped the major indices and sent the Dow Jones Industrial Average below the 9000 mark for the first time in five years.

The bears emerged in force at the final hour of trading. The Dow, which earlier had risen as much as 190 points, ended down 678.91 points, or 7.3%, at 8579.19. The S&P 500 sank 75.02, or 7.6%, to 909.92, and the Nasdaq lost 95.21 points, or 5.5%, at 1645.12.

October has proved a brutal month thus far for the market. The Dow has been down every day since the start of the month, losing some 2,000 points in that short time. It was just one year ago to the day that the Dow closed at an all-time record high of 14,164. The last time the index traded below 9000 was on Aug. 6, 2003.

On Wednesday, markets sold off even after the Federal Reserve, along with central banks in Europe and Canada, orchestrated a coordinated cut in interest rates to help free up the credit markets.

As Thursday's session got underway, credit markets continued to tighten despite the rate cuts. Three-month Libor, a measure of the rate banks charge one another for large loans, was up 43 basis points to 4.75%. Overnight Libor was up 1.16 percentage points to 5.09%.

Commercial paper wasn't faring much better. The Fed reported that the market for company debt declined by $56.4 billion to $1.55 trillion for the week ended Oct. 8. Paper issued by financial institutions was down $42.4 billion to $641 billion, the Fed said.

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