The Federal Reserve's Open Market Committee also released minutes from its latest meeting. The minutes indicated the central bank expects GDP to be flat for 2008, down from a previous estimate of 0.3% growth. The FOMC notes also said that additional interest-rate cuts may be necessary and indicated that the Fed would continue to do whatever is needed to aid the economy.

Few stocks remained afloat in the wash of negative sentiment.

Contributing to investor fear was the hobbled automotive sector. After arriving hat in hand on Capitol Hill Tuesday to plead their case for access to federal funding, chief executives of the woebegone companies General Motors ( GM), Ford ( F) and Chrysler were attempting again Wednesday to exchange a grilling by members of Congress for billions of dollars in government aid. The Big Three have been walloped lately by a combination of flagging sales, troubles in their finance divisions and high labor costs.

GM shares plummeted 9.7% to $2.79, and Ford tanked 25% to $1.26.

Insider Insights

"There's been no sign from any of the three auto companies that they are willing to change any significant aspect of their business models or their business plans," said Fred Dickson, director of private client research at DA Davidson. "It's basically, 'Here's what we've done in the past; it should be good enough.'"

Dickson said Senate Republicans will likely need to see signs that the automakers will restructure their business models before they act. "The next step is going to be to see what GM does," he said.

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