Oct. 24 (Bloomberg) -- Stocks in the U.S. fell after a sell- off in Asian and European markets heightened concern the financial crisis is plunging the world's economy into a recession.

The U.S. market escaped the worst of the global slide that sent South Korean shares down 11 percent and Russia's benchmark index plunging 14 percent. Bank of America Corp., the second-largest U.S. bank by market value, fell 8.4 percent and DuPont Co., the nation's third-biggest chemical producer, lost 6.9 percent as all 10 industry groups in the Standard & Poor's 500 Index retreated at least 2.6 percent.

``It's a bear market on steroids,'' David King, a money manager at Putnam Investments, who helps oversee about $137 billion, told Bloomberg Television. ``It's very accelerated by the pace of financial markets today.''

The S&P 500 sank 31.34 points, or 3.5 percent, to 876.77 after losing as much as 6.1 percent during the day. The Dow Jones Industrial Average slid 312.30, or 3.6 percent, to 8,378.95. The Nasdaq Composite Index declined 51.88, or 3.2 percent, to 1,552.03. Almost eight stocks fell for each that rose on the New York Stock Exchange.

$10 Trillion Lost

The global tumble in stocks sent the MSCI World Index down almost 5 percent to its lowest level since June 2003. Yields on 30-year Treasuries touched a three-decade low as investors sought the safety of government debt. The yen climbed to a 13-year high against the dollar.

The S&P 500 lost 6.8 percent this week and the Dow average dropped 5.4 percent, while the Nasdaq Composite Index retreated 9.3 percent. The S&P 500 is down more than 40 percent in 2008, poised for its worst yearly retreat since 1931.

More than $10 trillion has been erased from the market value of equities so far this month, accounting for about one-third of the total value wiped off stocks this year. MSCI's index of developed and emerging stock markets plunged 48 percent in 2008 and is heading for its worst year on record as credit-related losses topped $660 billion in the worst financial crisis since the Great Depression.

In trading before the official open of U.S. exchanges, contracts on the Dow average expiring in December dropped 550 points and S&P futures tumbled 60 points before the Chicago Mercantile Exchange imposed ``limit down'' bans prohibiting further declines.

`Pathetic Moral Victory'

``It's a pathetic moral victory, but the fact that we're not down 1,000 is telling me the market's sensing value,'' said John Lynch, the Charlotte, North Carolina-based chief market analyst at Evergreen Investments, which manages $245 billion.

The Chicago Board Options Exchange Volatility Index surged as much as 32 percent to 89.53, the highest in its 18-year history. The VIX measures the cost of using options as insurance against S&P 500 declines.

Many investors and analysts speculated that today's declines were being exacerbated by hedge funds facing margin calls, or demands to repay borrowed money used to buy shares whose value has dropped.

``This must be forced selling, probably hedge funds,'' said Nick Sargen, chief officer at Fort Washington Investment Advisors, which oversees $30 billion in Cincinnati. ``A rational investor, and I emphasize rational, wouldn't be selling now.''

Bank of America, the largest U.S. consumer bank, fell the most in the Dow average, sliding 8.4 percent to $21.07. DuPont, the third-largest U.S. chemical maker, lost 6.9 percent to $29.33. Caterpillar, the world's largest maker of bulldozers and excavators, retreated 5.8 percent to $33.30.

`Spillover'

General Electric Co., the economic bellwether whose products range from power-plant turbines to locomotives, dropped 5.8 percent to $17.83 and was the biggest drag on the S&P 500. Exxon Mobil Corp., the biggest U.S. oil company, declined $1.35 to $69.04. Chevron Corp., the second-largest, lost $2.86 to $63.91.

Crude oil lost 5.4 percent to $64.15 a barrel, while copper and crops also retreated. An S&P GSCI index of 24 raw materials has dropped 31 percent since September, poised for a record quarterly decline.

``It's the spillover of the banking crisis into real economies around the world,'' said Michael Mullaney, a Boston- based money manager at Fiduciary Trust Co., which oversees $10 billion. ``Everything's going down hard. Diversification is not working right now, that's what it amounts to. We're throwing everything out.''

Only 63 of the S&P 500's companies advanced today. The index is trading below its lowest close since April 2003, as is the Dow.

Earnings Watch

Earnings at S&P 500 companies that have reported third- quarter results so far dropped by an average of 23 percent, trailing analysts' projections by 1.6 percent, according to data compiled by Bloomberg.

S&P 500 profits declined from the year-earlier period in each of the past four quarters. For the fourth-quarter, analysts estimate a 19.2 percent increase. For fiscal 2009, they project growth of 15.2 percent, according to estimates gathered by Bloomberg.

American International Group Inc. declined 19 percent to $1.70. The insurer said it has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount that exceeds the size of the original loan meant to save the company.

National City

National City Corp. slumped 25 percent to $2.07. PNC Financial Services Group Inc., Pennsylvania's largest bank, plans to buy National City, Ohio's largest bank, for about $5.2 billion in stock with funds from the U.S. Treasury. PNC's offer of $2.23 a share is 19 percent less than National City's closing price yesterday. PNC added 3.5 percent to $58.88.

Fifth Third Bancorp, Ohio's second-biggest bank, slid 29 percent to $8.07 after being downgraded to ``sell'' from ``neutral'' at Goldman Sachs Group Inc.

Insurance companies rallied after a person briefed on the plan said the U.S. Treasury is considering taking stakes in the companies as well as regional banks in the next round of capital injections meant to shore up the financial system.

Hartford Financial Group Inc. rallied 16 percent, while Genworth Financial Inc., Aflac Inc. and MetLife Inc. climbed more than 7 percent for the top four advances in the S&P 500.

About 1.6 billion shares changed hands on the floor of the NYSE, 8.5 percent more than the three-month daily average.

The U.K.'s FTSE 100 Index tumbled 5 percent after the nation's economy shrank for the first time since 1992. South Korea's Kospi Index sank 11 percent as the country's economy grew at the slowest pace in four years. Russia's Micex Stock Exchange suspended trading until next week after its benchmark index slid 14 percent.

The MSCI Emerging Markets Index tumbled 7.8 percent as Brazilian stocks fell to the lowest level in three years.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: October 24, 2008 17:24 EDT