Economic fear and credit worry slam Wall St

By Kristina Cooke

NEW YORK (Reuters) - U.S. stocks slid on Thursday as tight credit markets and bleak economic data forced investors to focus on the rocky road still ahead for the U.S. economy even if Congress passes a $700 billion (397 billion pound) rescue package this week.

The Dow shed more than 3 percent while the S&P 500 and Nasdaq dropped 4 percent as Wall Street worried the economy may slide into recession, further cutting into corporate profits.

Data showing the number of people filing for unemployment benefits hit a seven-year high painted a troubling picture, as did a report showing a steep drop in factory orders in August.

"It's almost a perfect storm and it's starting to hit home," said Alan Lancz, president of Alan B. Lancz & Associates Inc, in Toledo, Ohio, adding that the weak data showed the extent of the damage from stagnating credit markets.

That added to anxiety about the fate of the government's rescue plan, which the Senate passed on Wednesday after the House rejected it in its original form. A second House vote was expected on Friday.

The price of oil plummeted more than 4 percent as financial market turmoil stoked concerns about demand for fuel and precious metals slid as the dollar rose.

"There's a big fear that the bill is not going to pass, which is weighing on the markets, and at the same time, we are watching commodities totally fall apart," said Angel Mata managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

The Dow Jones industrial average .DJI fell 348.22 points, or 3.22 percent, to 10,482.85, while the Standard & Poor's 500 Index .SPX slid 46.78 points, or 4.03 percent, to 1,114.28. The Nasdaq Composite Index .IXIC dropped 92.68 points, or 4.48 percent, to 1,976.72.