The worst financial crisis since the Great Depression has now wiped out 5-1/2 years of gains on Wall Street. 

The latest meltdown occurred on Wednesday as the markets were slammed by a gloomy new economic forecast from the Fed, crumbling financial stocks and an new onslaught of bearish economic data. 

Today's Market

The Dow Jones Industrial Average slid 427.47 points, or 5.07%, to 7997.28, the broader S&P 500 lost 52.54 points, or 6.12%, to 806.58 and the Nasdaq Composite fell 96.85 points, or 6.53%, to 1386.42. The consumer-friendly FOX 50 dropped 36.15 points, or 5.45%, to 627.37.

“The sentiment is as bad as it could be," said Michael James, senior equity trader at Wedbush Morgan Securities. 

The selling accelerated late in the session as the Dow broke through its annual lows, ending below the 8000 level for the first time since March 2003. The benchmark U.S. index is off by 14% this month alone, and has plummeted 43% from its all-time record of 14164 set in October 2007. 

“I think it’s really fear that’s driving the market right now and it can drive it a hell of a lot further to the downside than everybody thinks," said Paul Nolte, director of investments at Hinsdale Associates. 

Wednesday's selloff marked the sixth-worst one-day plunge for the Dow this year. The losses only add to the market's recent slump as the blue-chip index has closed lower for eight of the past 11 days. 

Nearly all 30 components of the Dow fell by more than 2%, led by Citigroup (C), which lost nearly one-quarter of its market cap, sinking to levels unseen in 13 years. Financial giants JPMorgan Chase (JPM) and Bank of America (BAC) also took double-digit falls and General Motors (GM) hit a fresh 66-year low as it argues its bailout case to Congress. Defensive stocks like Coca-Cola (KO) and McDonald's (MCD) saw more modest selling but still closed lower.

“I don’t see anything great on the horizon, but I don’t see things getting much worse," NYSE trader Jason Weisberg of Seaport Securities told FOX Business.

Led by a steep decline from Yahoo! (YHOO), the Nasdaq Composite ended at its lowest level since April 2003. The index has now lost more than half of its value since its multi-year high of 2859 hit in October 2007. 

There was no shortage of bearish headlines pulling the markets down: a prediction by the Fed for economic contraction through the first half of 2009; financial stocks losing 10% of their value; and the biggest monthly drops in home construction and consumer prices in history. 

Gloomy Forecast from Fed

The markets began their afternoon freefall after the Federal Reserve's latest minutes showed the central bank slashed its growth expectations. Policymakers now believe gross domestic product could be flat or grow by just 0.3% in 2008 and then shrink or expand by only 1.1% in 2009, all but guaranteeing a recession. 

The Fed now sees 2008 unemployment in the 6.3% to 6.5% range and also signaled more interest rate cuts could become necessary even as rates remain at historically low levels. 

Financials Tank; Citi Hits 13-Year Low

Banking stocks lost more than 10% of their value as a group as the economic weakness and credit crisis continue to take their toll. No one was spared as Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MS) all saw double-digit plunges. 

The losses were headlined by Citigroup (C), which fell to a new 13-year low. Citi's market cap has plummeted to as low as $42.2 billion, well below its market value of more than $270 billion in late 2006. In fact, Citi is now behind U.S. Bancorp (USB), a bank that is one-eighth as large by assets. 

The latest losses for Citi come after the Financial Times reported the bank is liquidating its Corporate Special Opportunities hedge fund after it lost 53% of its value last month.

Auto Bailout in Focus 

Aside from the latest financial turmoil, the markets were hurt by another round of testimony on Capitol Hill from executives of the Big Three auto makers. General Motors (GM), Ford (F) and Chrysler LLC continued their efforts to persuade lawmakers to open up the government's $700 billion financial rescue package to the embattled auto industry. 

The execs told lawmakers they have begun to study the possibility of filing for bankruptcy protection, which some politicians have said would be the more favorable option to another massive bailout. However, Ford and GM said they don’t believe bankruptcy is a viable option as it would likely lead to liquidation.

In the commodity markets, crude oil futures extended their losing streak to four after the government said crude inventories rose by a larger-than-expected 1.6 million barrels last week. The price of a barrel of crude ended at another new 22-month low: $53.62, down 77 cents.

Data Dump

The markets were dragged down by the latest economic reports, each of which detailed the precarious state of the U.S. economy.

The Commerce Department said construction of new homes plummeted by 4.5% in October to the lowest level in records going back to 1959. While the rate of construction below the previous record set in the 1991 recession to 791,000 units, the numbers could have been worse as economists had forecasted a rate of 780,000 units. 

The government also said consumer prices last month took the largest one-month plunge on records going back to February 1947, underscoring the huge decline in crude oil prices that was sparked by fears of a global recession. 

The Commerce Department said its consumer price index fell 1% in October, a sharper decrease than the 0.7% forecasted by economists. Excluding volatile food and energy prices, core prices declined by a more modest 0.1% last month, the first drop in core prices in more than 25 years.

Corporate Movers

Yahoo! (YHOO) plunged double-digit percentages after Microsoft (MSFT) CEO Steve Ballmer shot down hopes the software giant would renew its efforts to acquire Yahoo. 

BJ's Wholesale Club (BJ) posted an in-line 24% jump in third-quarter profit and boosted its forecast for the full year. The No. 3 U.S. warehouse club operator earned 48 cents per share on a 13.4% rise in sales to $2.4 billion. 

Boeing (BA) may add up to 10 weeks to the production schedule for all of its planes on backlog as the aircraft maker tries to recovers from the costly machinists strike, The Wall Street Journal reported. 

General Electric (GE) plans to reorganize GE Capital, its finance arm, in an effort to cut costs by $2 billion next year. It isn't clear how many jobs could be cut in the reorganization. 

Genentech (DNA) fell sharply after a new study found its popular cancer drug Avastin significantly raises the risk of blood clots when used with chemotherapy. 

Toyota (TM) plans to stop production at its North American factories for two days next month as the world's biggest auto maker reacts to slumping demand. 

Global Markets

World indexes closed deeply in the red Wednesday, led by sharp declines from Germany's DAX Index, which closed down 225.38 points, or 4.92%, to 4354.09. London's FTSE 100 Index was off by nearly as much, falling 202.87 points, or 4.82%, to 4005.68.

In Asia, Japan's Nikkei 225 closed down 55.19 points, or 0.66%, to 8273.22, while Hong Kong's Hang Seng Index fell 100.09 points, or 0.77%, to 12815.80.