Wall Street sinks to lowest since 2003

By Leah Schnurr

NEW YORK (Reuters) - U.S. stocks plunged to their lowest in five-and-a-half years on Wednesday as investors girded for a lengthy economic downturn and automotive executives predicted a far-reaching calamity without a government lifeline.

Shares of General Motors Corp plummeted to the lowest in 66 years and Ford hit a 26-year low, but the pain was spread well beyond the automotive sector. Financial shares fell by double-digit margins as a meltdown in the commercial real estate market fanned fears of another wave in the credit crisis.

Late in the day, the Federal Reserve slashed its economic growth forecasts through 2009, helping unleash a wave of selling that continued into the closing bell.

"We're witnessing the worst market crash in most people's lifetimes," said David Bianco, chief U.S. equity strategist at UBS in New York. "People seem to enjoy telling each other how bad its going to get and working themselves into a frenzy. It's just becoming silly."

The Dow Jones industrial average tumbled 427.47 points, or 5.07 percent, to 7,997.28. The Standard & Poor's 500 Index fell 52.54 points, or 6.12 percent, to 806.58. The Nasdaq Composite Index lost 96.85 points, or 6.53 percent, to 1,386.42.

It was the first time the Dow closed below the 8,000 level since March 2003. The S&P 500 and the Nasdaq broke through last week's intraday lows, which were the lowest in more than five years.

GM's stock cut its loss for the day almost in half, but still ended down 9.7 percent at $2.79 after earlier dropping to a 66-year low. Rival Ford sank 25 percent to $1.26 as investors worried about the possibility that there will be no quick proposal from Congress to resolve the problems hounding the auto 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 getting done this week remained uncertain, even as legislators proposed compromises to the original plan.