U.S. market falls on economic and auto bailout anxiety

By Leah Schnurr

NEW YORK (Reuters) - U.S. stocks fell on Wednesday as financial shares tumbled and uncertainty over a possible rescue for the U.S. auto industry fuelled concerns about the deepening economic slump.

Adding to the gloom, the Federal Reserve slashed its economic growth forecasts through 2009 and minutes from the Fed's most recent policy meeting showed officials believed more interest rate cuts may be needed as the economy falters.

"It's certainly the Fed confirming what the market has realized -- that the recession is here," said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.

Shares of General Motors dove more than 15 percent to a 66-year low, while rival Ford slumped to a 26-year low as investors worried about the possibility that there will be no quick proposal from Congress to resolve the problems hounding the industry before its session draws to a close.

U.S. auto executives were on Capitol Hill for a second day to plead their case for a $25 billion aid package. Prospects for a bailout have been uncertain but legislators have begun to talk about crafting some sort of deal.

Investors are concerned about how a possible bankruptcy for U.S. automakers could further hurt an already fragile economy.

The Dow Jones industrial average slid 215.85 points, or 2.56 percent, to 8,208.90. The Standard & Poor's 500 Index lost 31.66 points, or 3.69 percent, to 827.46. The Nasdaq Composite Index gave up 57.02 points, or 3.84 percent, at 1,426.25.

The benchmark S&P 500 index was close to testing the more than five-year intraday low that was hit last week.