Renewed anxiety over the outlook for financial firms dragged down global stocks today, as a move by the world's leading central banks to thaw a worldwide credit crunch failed to stem fears and investors took refuge in safe havens like gold and bonds.
Six major central banks injected $180 billion of extra liquidity into financial markets to calm panicky investors. The reprieve proved temporary as investors stayed alert for the latest victim of a credit crisis that is giving Wall Street its most dramatic transformation since the Great Depression.
Worries about the ability of the two remaining independent US banks, Morgan Stanley and Goldman Sachs, to survive as stand-alone entities overtook enthusiasm on the move by the central banks, which had initially lifted stocks in Europe and the United States.
The US dollar fell to session losses against the yen after global shares surrendered gains and gold extended yesterday's rally, with US gold futures rising above $900 an ounce.
Central banks' efforts to restore confidence were helpful, "but fear and greed dictate the short-term market and that's what we are living through right now," Conroy said. "There's a lot of anxiety, and anxiety breeds volatility."
The Dow Jones industrial average was down 112.68 points, or 1.06 per cent, at 10,496.98. The Standard & Poor's 500 Index was down 19.11 points, or 1.65 percent, at 1,137.28. The Nasdaq Composite Index was down 26.13 points, or 1.24 percent, at 2,072.72.
The top three drags on the benchmark S&P 500 were Goldman Sachs, State Street Corp and Morgan Stanley, all down more than double digits.
The biggest decliner among New York Stock Exchange-listed companies was life and mortgage insurer Genworth Financial Inc,down almost 40 per cent.
The investment portfolio of State Street, one of the largest custodian banks in the world, came under question.
European stocks closed lower after reversing gains in late trade.
HBOS jumped 17 per cent after Lloyds TSB said it would take over the embattled UK lender in a $22 billion deal the government helped. Lloyds fell 15.1 per cent.
The FTSEurofirst 300 index of top European shares closed down 0.6 per cent at 1,063.69 points, its fourth straight session of losses.
The index has lost about 9 per cent so far this week, and is on track for its worst week since the attacks of Sept. 11, 2001.
The dollar dipped to a two-week low against the euro, while the yen also fell.
The euro rose 0.84 percent at $1.4423.
Asian stocks overnight fell. Japan's Nikkei share average ended down 2.2 percent to a three-year low. The MSCI Asia-Pacific ex-Japan stocks index fell 3.7 percent after earlier touching the lowest since July 2006.