Wall Street posted a dramatic comeback Monday afternoon to avoid record losses, but global credit fears still pushed the Dow below the pivotal 10,000 level for the first time since October 2004.

Today's Market

The Dow Jones Industrial Average slid 369.88 points, or 3.58%, to 9955.50. The broader S&P 500 Index lost 42.34 points, or 3.85%, to 1056.89 while the Nasdaq Composite fell 84.43 points, or 4.34%. to 1862.96. The consumer-friendly FOX 50 dropped 27.87 points, or 3.39%, to 794.80.

While Monday's losses were ugly, the markets were able to bounce back from the steepest intraday point loss in the Dow's history. Even at its worst level, the selloff on a percentage basis was well shy of the 22% loss on Black Monday in October 1987.

“There was a palpable sense of fear about how bad things could get,” said Michael James, senior equity trader at Wedbush Morgan Securities. “When things started improving, all of those sellers who were scared about tomorrow decided to stop selling. It was a pretty frantic scramble.”

There was no clear catalyst for the afternoon comeback but rumors of a coordinated interest rate cut from global central banks swept Wall Street throughout the day. Late Monday Japan's The Nikkei newspaper reported France  had proposed an emergency G8 meeting on the financial crisis.

Just a year ago the Dow hit all-time highs of nearly 14200. Since then, the benchmark U.S. index has lost nearly one-third of its value as a major housing slump and credit freeze has taken its toll on the economy and the markets.

Wall Street has suffered a pair of selloffs since Congress passed a $700 billion bailout package on Friday aimed at rescuing the nation's battered financial system.

“The problems just don’t evaporate because somebody signs a bill,” NYSE trader Ted Weisberg of Seaport Securities told FOX Business. 

Bank of America (BAC) and Microsoft (MSFT) led the way down on the Dow Monday, falling 6% a piece. Aluminum titan Alcoa (AA) closed sharply lower just a day before it kicks off earnings season by announcing its quarterly results. 

The Nasdaq Composite saw steeper losses than the broader market but also rebounded from its lows. Tech giants like Oracle (ORCL), eBay (EBAY) and Google (GOOG) ended sharply lower. 

On top of the losses in the equities markets, crude oil prices were slammed by recession fears, tumbling below $90 a barrel for the first time in eight months. 

Credit Worries Hover Over Europe

Global markets tanked on Monday after European governments were forced to come to the rescue of financial institutions for the second weekend in a row. 

London’s FTSE fell 7.9% for its third-worst one-day drop, Germany’s Dax ended down 7.1% and France's CAC 40 suffered its worst plunge ever. Russia halted trading three times before its markets closed down nearly 20% each.

“There seems to be this snowball effect. We’re down because of Europe and they are down because of us," Marc Pado, U.S. market strategist at Cantor Fitzgerald. 

The European turmoil centered around a pair of financial giants: German’s Hypo Real Estate and financial conglomerate Fortis.

Germany stepped in and offered an emergency 15 billion euro loan to Hypo Real Estate after a private solution collapsed late last week. The Dutch government seized Fortis’s operations in the Netherlands while BNP Paribas acquired the bank operations in Belgium and Luxembourg.

Responding to the financial turmoil, the Federal Reserve unveiled plans to pay interest on commercial banks’ depository reserves. The move allows the central bank to further boost liquidity without cutting key interest rates. The Fed also expanded its loan program to banks on Monday.

Recession Fears Return

Economic worries were reinforced after the National Association for Business Economics said Monday that 69% of economists surveyed believe the U.S. is in or near a recession. "The general view is .... that this recession will be longer than the last two -- lasting roughly one year, but relatively mild," the NABE survey said.

Also, Goldman Sachs economists predicted a "significantly deeper" U.S. recession than previously thought, including no growth at all from the middle of 2008 until the middle of 2009. 

Last week saw particularly ugly economic news, including a report showing non-farm payrolls fell by 159,000 in September -- the worst month in the labor market since March 2003. 

The negative market psyche was also evident in the VIX, a gauge of market fear, which soared more than 15% to the highest levels of the credit crisis.

“That shows how much panic is in this market," said Pado.

Despite the overwhelming pessimism on Wall Street, some were hopeful stocks will soon find a bottom.

“I think there is a big rally in here," said Weisberg. "I think it’s way overdone on the downside… I don’t know where they bounce but there’s a bounce in there somewhere.”

Meanwhile, crude oil futures plunged below $90 a barrel on Monday amid fears a weakened economy will dampen demand for energy. Crude closed $6.30 lower to $86.71 a barrel. 

Oil prices have been on a rollercoaster ride in 2008, rocketing up to $145 a barrel by mid-July only to take a nosedive back to double-digit prices. 

The turmoil overseas pushed the greenback to 14-month highs against its European counterparts. The dollar surged 2.05% to $1.3489 per euro Monday afternoon. 

Corporate Movers

Citigroup (C) filed suit against Wells Fargo (WFC) and Wachovia (WB) on Monday. Citi is seeking $60 billion in damages from Wells Fargo for allegedly interfering with an exclusive agreement Citi had to acquire Wachovia’s banking operations. 

ImClone (IMCL) saw its shares rise after the biotech giant signed off on a $6 billion offer to be bought by Eli Lilly (LLY). The offer from Lilly trumps a $62 a share bid from drug giant Bristol-Myers Squibb (BMY). 

Hartford Financial (HIG) received a $2.5 billion investment from European insurer Allianz, slashed its dividend by 40% and warned of a third-quarter loss. The U.S.-based insurance giant lost more than half of its market value a week ago on liquidity worries.

EBay (EBAY) fell sharply to 52-week lows after unveiling plans to slash 10% of its workforce and saying third-quarter earnings will likely exceed its prior forecast. The online auction site also disclosed a trio of acquisitions, including one to buy payments service Bill Me Later for $820 million in cash.

Kraft (KFT) could announce hundreds of layoffs on Monday in its North American operations, the Chicago Tribune reported. The cuts will impact less than 1% of the food maker’s work force and will be spread out geographically, the newspaper reported.