Stocks, interest rates tumble on mix of bad news

Stocks and interest rates fell sharply Wednesday as more bad news chipped away at investors' view of the economy.

The Dow Jones industrial average fell 265 points, and all the major indexes fell more than 2 percent and are now showing losses for the year. The Dow has now fallen four days out of five, and it has lost almost 320 points in just the past two days.

Meanwhile, the yield on the Treasury's 10-year note fell to its lowest level since March 2009 as investors avoided stocks and sought safety of government securities.

Only 442 stocks rose on the New York Stock Exchange, while 2,627 fell, a sign that investors expect all businesses to suffer if the economy continues to weaken.

Investors' gloom deepened a day after the Federal Reserve said it would begin buying government bonds as a way to stimulate the economy. News of slower industrial growth in China and a disappointing economic indicator in Japan helped send stocks plunging first in Asia, then in Europe.

The economic news in the United States also was troubling. The Commerce Department said the trade deficit widened in June to its highest level in 20 months as exports dipped. Falling exports mean U.S. manufacturing could be slowing down. And early this year, manufacturing showed the most consistent signs of recovery.

The Dow dropped 265.42, or 2.5 percent, to 10,378.83, its largest slide since it fell 268.22 on June 29.

The Standard & Poor's 500 index fell 31.59, or 2.8 percent, to 1,089.47.

The S&P 500 slipped below 1,100, a key psychological level. Falling and holding below that level could lead to more selling as computer-driven trading sets in.

The Nasdaq composite index fell 68.54, or 3 percent, to 2,208.63.