U.S. Stocks dive on belief global recession is at hand

The Dow Jones Industrial Average slid 5.20 percent to 8,239.33 in the first five minutes.

The Nasdaq fell 6.14 percent to 1,505.47 and the Standard & Poor’s 500 index sank 5.56 percent to 857.59.�

The massive decline was caused by increasingly grim news from overseas. In Japan, shares of Sony sank more than 14 percent after it slashed its earnings forecast for the fiscal year.

In Germany, Daimler's stock dropped 11.4 percent in morning trading after it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.

Japan's Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany's benchmark DAX index was down 10.76 percent, Frances CAC40 dropped 10 percent while Britain’s FTSE 100 sank 8.67 percent after the government said its gross domestic product fell 0.5 percent in the third quarter, putting the country on the brink of recession.

The dour outlook convinced investors that the world economy is headed for a long and severe downturn despite a raft of government rescue efforts aimed at pulling the financial system from the brink. It also indicated that the tremors caused by the global credit crisis may have only begun to be felt in their true scope and magnitude.

"There's a lot of panic out there today," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "People have been saying that were in a recession. This is the realization."

Fearing more carnage in world equity markets, big hedge funds and other institutional investors have been pulling out their money en masse in a bid to reduce risk and raise cash - a process known as deleveraging that only intensifies the selling.

Meanwhile, individual investors that have seen their holdings decimated in recent weeks have been yanking money out of mutual funds, adding to the downward pressure on markets.

"I think it would be natural to make an assumption that there are some funds in trouble and that we may see some funds shut down," Fullman said.

U.S. FUTURES TRADING LIMITED
U.S. stock markets also faced steep declines at Friday’s opening bell after growing fears of a global recession pummeled overseas markets and trading curbs limited stock futures trading.

Futures on the Standard & Poor’s 500 Index fell 60 points to 855.20, the “limit down” for the contract, Dow Jones Industrial Average futures declined 550 points, reaching its limit down of 8224.

Market officials said the 6 percent limit down trading curb would not allow the contracts to decline further until the Wall Street opening.