Dow dives below the 7,000 mark

Fears that the world's economies are even weaker than had been thought ricocheted around the globe on Monday as investors from Hong Kong to London to New York bailed out of stocks.

Losses cascaded from one market to the next as concern spread that government efforts so far have not been enough to stabilize troubled financial institutions or broader economies.

The losses were bad everywhere, but especially severe in Europe, where an emergency summit meeting over the weekend ended in bickering and rejection of a bailout plea from Hungary.

In the United States, the Dow Jones industrial average fell below 7,000 for the first time since 1997 as investors reacted to reports that construction and industrial activity has continued to decline and to a $61.7 billion loss posted by the insurance giant, the American International Group -- the largest quarterly loss ever for a company.

In Britain, the major stock market index lost 5.3 percent, and the performance of the major Italian index was worse, declining 6 percent. With the dollar also gaining, the losses were even greater for international investors in those markets.

In the United States, the Dow fell 299.64 points, or 4.24 percent, to 6,763.29, while the Standard & Poor's 500-stock index fell 34.27 points, or 4.66 percent, to 700.82. The Nasdaq composite ended down 54.99 points, or 3.99 percent, at 1,322.85.

Crude oil settled at $40.15 a barrel, down $4.61.

"It's pretty despondent everywhere," said Dwyfor Evans, a strategist at State Street Global Markets in Hong Kong. "OK, there are signs that some of the leading indicators have stabilized to some extent, but it's at a very, very low level, and we're not seeing corporate investment picking up, or consumers starting to spend again -- in other words, the traditional mechanisms by which economies come out of a recession are absent at this time."

Hopes that the U.S. economy, which led the world into recession, might lead it back out later this year have been receding.

Over the weekend, billionaire investor Warren Buffett, chairman of Berkshire Hathaway, wrote in his company's annual report that "the economy will be in shambles, throughout 2009, and, for that matter, probably well beyond."

As if to emphasize the problems, the Institute for Supply Management reported that companies in Britain, France, Germany, Italy and the United States said business was getting much worse, particularly in terms of jobs.

Paul Dales, an economist with Capital Economics, pointed to the survey in forecasting that the February employment report will show a decline of 785,000 jobs when it is released on Friday. If so, it would be the largest one-month decline in employment in nearly 60 years.

Last week, the United States revised its estimate of fourth-quarter gross domestic product to show a decline at an annual rate of 6.2 percent, the worst in more than a quarter century. On Monday, in reporting that construction activity fell sharply in January, the government also revised the December figure lower.

"That change could move the fourth-quarter figure down to a 7 percent decline," said Robert Barbera, chief economist of ITG, a research firm.

Dollar is gaining

Despite the American problems, the dollar has been gaining ground, particularly against European currencies. The euro slipped to under $1.26, nearing a two-year low and down from a high of almost $1.60 last spring. There was a renewed flight to safety, with the 10-year Treasury bond yield falling to under 3 percent.

The continued plunge of the stock markets has stunned investors and governments. Over the six months that ended last week, the S&P 500 lost 43 percent of its value. There were similar declines during the Great Depression, but since then, the worst six-month performance before the current plunge was a 32 percent fall in 1974, when the world was also in recession.

While there has been speculation about international cooperation to deal with the growing financial and economic crisis, the European Union summit meeting this weekend provided an indication that few countries were willing to risk their own taxpayers' money to help others.

"The EU again has proven it is unable to manage a coordinated response to the crisis," Commerzbank analysts wrote in a note Monday. "The problems arising in Eastern Europe will put further pressure on the euro."

Bettina Wassener and Judy Dempsey of the New York Times contributed reporting.