Dow Jones Industrial Average has seen its fair share of large point declines during the recession

Recession fears pound stocks

Weak US economic growth, worldwide debt concerns send major indexes reeling

A trader worked the New York Stock Exchange floor. Yesterday’s trading session was the eighth in nine that stocks have fallen.

The stock market plunged by more than 4 percent yesterday in its worst day in more than two years and investors flooded safe-haven investment alternatives, driven by escalating fears the wobbly global economy may stumble into a new recession.

The benchmark Dow Jones industrial average fell 512.76 points to close at 11,383.68. Another key marker, the Wilshire 5000 Total Market index, the broadest measure of US stocks, lost $800 billion in value - its worst single-day performance since January 2009.

Yesterday was the eighth day in nine trading sessions that stock prices have declined, and the Dow has now exceeded the 10-percent drop from recent highs that mark a so-called "market correction," signaling a shift in investors' sentiment that the immediate economic future is worsening.

"The velocity and the magnitude of the decline was surprising to me," said Tom Manning, chief investment officer at Silver Lake Advisors, an investment firm in Boston. "Fears of a recession seemed to grip investors all day long."

Investors have been spooked by a series of reports and events - beginning last Friday - that undermined the once widely held view the US economy was in recovery mode from the recent recession and poised to grow at a faster pace through the second half of the year. That early outlook had served as the basis for everything from stock market values to business plans to political campaign strategies.

But a much different picture has emerged in the past few days: economic growth so anemic that the once-distant thoughts of another recession now don't seem so far-fetched. Last Friday, the government reported that the nation's gross domestic product grew at a slower-than-expected pace during the second quarter and also sharply revised its previous report on growth in the first three months of 2011. Additional economic reports that followed showed output from factories and service businesses, and consumer spending had all turned sluggish in July.

"Economic indicators are coming in worse than anticipated and decision-making is frozen," said Sara Johnson, a global economist at IHS Global Insight, an economics firm in Lexington. Johnson said her firm had estimated the chance of a new recession at 25 percent but "at this point we'd probably raise it to 30 percent."

The next key indicator of where the US economy is headed will come this morning when the government reports on the nation's unemployment rate for July. Most forecasts expect the rate to remain unchanged at 9.2 percent.

One feature of the current market downturn is the extreme measures investors are willing to take to safeguard their money in such a volatile time - including the extraordinary step of paying a bank to take their money. Yesterday Bank of New York Mellon Corp. said it would begin charging a fee to some institutional clients for "extraordinarily high" cash deposits. The move follows a flood of withdrawals from money market mutual funds - more than $100 billion over a recent one-week period - as investors and corporations appeared to be putting that cash into banks.

The Dow's 10 biggest point losses

The Dow Jones Industrial Average has seen its fair share of large point declines during the recession.

Here's a look at the Dow's 10 biggest daily point losses of all time, including the Aug. 4, 2011, drop, which comes in at number nine.