NEW YORK (AP) - Gripped by fear of another recession, the financial markets suffered their worst day Thursday since the crisis of 2008. The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline ever.
The sell-off wiped out the Dow's gains for 2011. It put the Dow and broader stock indexes into what investors call a correction - down 10 percent from the highs of this spring.
"We are continuing to be bombarded by worries about the global economy," said Bill Stone, the chief investment strategist for PNC Financial.
Tri-State families banking on investments are now being forced to make changes.
"We're not panicked, but we feel like we're in a tough spot," said Lance Atkins of Anderson Township.
Atkins and his wife are getting ready to send their daughter to college. They had planned on liquidating assets to pay her tuition.
"This egg that we've been putting money into forever, we were ready to tap into, and now we're thinking we cant do that," Atkins said.
Thursday was reminiscent of the wild swings that defined the markets during the crisis three years ago. Gold prices briefly hit a record high, oil fell an extraordinary $5 a barrel, and frightened investors were so desperate to get into some government bonds that they were willing accept almost no return on their money.
It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks. Since July 21, the Dow has lost more than 1,300 points, or 10.5 percent of its value. It has closed lower nine of the 10 trading days since then.
For the day, the Dow closed down 512.76 points, at 11,383.68. It was the steepest point decline since Dec. 1, 2008.
Thursday's decline was the ninth-worst ever by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the market fell 22 percent.
Two weeks ago, investors appeared worried about the deadlocked negotiations in Washington over the debt ceiling. Almost immediately after that was solved, concerns about the economy took over, and the selling only accelerated.
On Thursday, growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.
The European Union has already given financial assistance to Greece and Ireland, two countries that have struggled to pay their debts. A financial rescue package for Italy or Spain might be more than the group of countries can handle.
Traders also unloaded stocks before Friday's release of the government's unemployment report for July, which is expected to show only weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.
Together, they produced "a perfect storm of selling," said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.
Not long ago, Wall Street had mostly convinced itself that the U.S. economy would improve in the second half of the year. Gas prices were falling, and Japanese factories were resuming production after disruptions from the March earthquake.
Then one report after another began to show that the economy was much weaker than first thought.
Manufacturing is barely growing. The service sector, which covers about 90 percent of the American work force, is growing at the slowest rate in a year and a half. People spent less in June than in May, the first decline since September 2009.
And the overall economy is expanding at the slowest pace since the end of the Great Recession. It grew at an annual rate of less than 1 percent for the first six months of this year, raising the risk of another recession.
In an indication of how frightened investors are, Bank of New York Mellon said it would start charging large investors to hold their cash. The bank's clients include pension funds and large investment houses.
Mark Luschini, chief investment strategist for Janney Montgomery Scott, an investment firm in Philadelphia, said his clients saw the move from stocks into cash as "a parking lot to sort things out."
"With the scars of 2008 still fresh," he said, "some clients don't want to miss the change to pre-empt further damage should it come."
Other market indicators reinforced the risk-averse mood. Gold, which is seen as a safe investment when the stock market is turbulent, set a record price, $1,684.90 an ounce, before falling to finish the day at $1,659. Adjusted for inflation, gold is still far below its record high, reached in 1980.
The yield on the 10-year Treasury note fell to 2.42 percent, its lowest of the year, and the yield on the 2-year Treasury note hit its lowest ever, 0.265 percent. Bond yields fall when demand for bonds increases.
The yield on the one-month Treasury bill fell to almost nothing - 0.008 percent. Investors were willing to accept paltry returns in exchange for holding investments they believed to be stable.
The sell-off was broad. All 10 industry groups in the Standard