Stocks Continue to Sink

Updated from 11:12 a.m. EDT

Stocks in New York continued to stumble Wednesday, as traders took in a broad array of gloomy economic data and assessed a heap of earnings statements, including results from banking titan JPMorgan Chase ( JPM).

The Dow Jones Industrial Average was losing 311 points to 9000, and the S&P 500 was lower by 42 points at 956. The Nasdaq stumbled 56 points to 1723.

On Tuesday, stocks finished with modest losses, as traders digested the Treasury Department's plan to take a $250 billion equity stake in U.S. banks. The government investment is part of the larger $700 billion Troubled Asset Relief Program to provide assistance to struggling financial firms.

Ahead of Wednesday's trading, the Federal Reserve said that Pimco, a unit of Allianz ( AZ), would be the custodian of the government's Commercial Paper Funding Facility, which will buy three-month commercial paper to support money markets.

Credit markets continued to loosen as central banks across the globe flooded the markets with liquidity. Three-month dollar Libor, a measure of the rate banks charge one another for large loans, declined 9 basis points to 4.55%, its third straight decline.

The money markets will look a lot more reassuring when net issuance of commercial paper recovers without the aid of the Federal Reserve, said Brian Bethune, director of financial economics Global Insight Economics. He said that he'd like to see Libor spreads come down another 150 basis points to the 3% range. "It's moving in the right direction," he said.

"I think it's only been in the past six weeks that the Fed and Treasury have really realized that this thing is a massive shock," said Bethune. "Once you get six months behind a crisis of this order of magnitude, you're in deep trouble," he said.

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