In the final 15 minutes of trading, the Dow dropped 277.65, or 3.08 percent, to 8,737.45. The Standard & Poor's 500 index fell 30.28, or 3.24 percent, to 904.42, while the Nasdaq composite index fell 56.42, or 3.41 percent, to 1,595.96.

The Russell 2000 index of smaller companies fell 19.05, or 3.70 percent, to 495.66.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to a light 902.6 million shares.

Bond prices were mixed Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.49 percent from 2.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, edged fell to 0.08 percent from 0.14 percent.

The dollar fell against most other major currencies, while gold prices declined.

Light, sweet crude slumped 12 percent, falling $5.95 to settle at $42.63 a barrel on the New York Mercantile Exchange. The decline, which erased a week of gains, came after the government reported commercial crude oil inventories jumped well beyond the increase analysts expected. The weak economy has eroded demand.

"Maybe the market was a little giddy starting the new year," said Anton Schutz, portfolio manager of the Burnham Financial Industries Fund and the Burnham Financial Services Fund. But Schutz doesn't believe Wednesday's decline will deter the market's recent upward trend.

"I don't think you can get discouraged on single days at this point in time," he said. "We've all seen a pretty good trend off the lows. I think we're going to continue to have a choppy environment."

"Nothing goes straight up or straight down," echoed Keith Springer, president of Capital Financial Advisory Services. "You do have some people who get skiddish and start taking some profits, but I don't think the up trend has been broken here."

The drop in oil weighed on the energy sector. Chevron Corp. fell $3.39, or 4.4 percent, to $73.96, while Occidental Petroleum Corp. fell $3.79, or 6.2 percent, to $57.85.

Technology stocks were among the biggest decliners after the Intel announcement. Microsoft Corp. fell $1.14, or 5.5 percent, to $19.62, while Qualcomm Inc. fell $1.77, or 4.8 percent, to $35.38.

Financial shares fell after Oppenheimer & Co. analyst Meredith Whitney warned that banks could have to raise fresh capital in 2009 as they face continued deterioration of their balance sheets. JPMorgan Chase & Co. fell $1.48, or 5 percent, to $28.40, while Citigroup Inc. fell 21 cents, or 2.8 percent, to $7.25.

The market's economic worries had been calmed a bit in recent days by President-elect Barack Obama's proposal to slash taxes and help businesses. On Tuesday, Wall Street overcame gloomy economic readings to finish with a moderate advance.

But investors are anxious for more details of the stimulus package, which could cost as much as $775 billion.

Overseas, Japan's Nikkei stock average rose 1.74 percent, and Hong Kong's Hang Seng index fell 3.37 percent. In Europe, Britain's FTSE 100 fell 2.83 percent, Germany's DAX index fell 1.77 percent, and France's CAC-40 fell 1.48 percent.

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