US stocks tumbled on Monday as news pointing to the deepening economic slump around the world erased the bulk of last week's sharp gains.
Financial services companies and retailers were among Wall Street's biggest casualties.
The Dow Jones Industrial Average sank 679.95 points or 7.70% to close at 8,149.09 in the fourth-steepest point loss in history for blue chips.
The Nasdaq composite plummeted 137.50 points or 8.95% to 1,398.07 and the broad-market Standard & Poor's 500 index sank 80.03 points or 8.93% to 816.21.
A pullback was expected after a huge rally over the past several sessions, with the Dow posting its best five-day percentage increase since 1932 of 17%. But selling began early and quickly became a freefall.
Market action came as the economic panel recognised as the arbiter of business cycles said the US had entered recession in December 2007 based on its measure of income, employment and other factors.
Also, a survey of the manufacturing sector showed the weakest conditions since 1982.
Shares of the largest US banks tumbled as investors feared the dramatically slowing economy will undercut their businesses as the credit crisis simmers.
Citigroup sank 22.2% to $US6.45 after an influential analyst forecast more losses for the major US bank.
Shares of Bank of America slid 21% to $12.85. The S&P financial index shed 17 percent.
European shares slump
European shares slumped on Monday, pressured by banks and commodity stocks, as mounting concerns about a prolonged global slowdown and weaker demand for oil and metals hurt market sentiment.
The FTSEurofirst 300 index of top European shares closed 6% down at 810.04 points after rising 13% last week.
The benchmark is down 46% so far this year after posting gains in each of the previous five years.
Banks were the worst hit, with Standard Chartered Bank falling 14% and UBS down 12%, Fortis slipping 11% and BNP Paribas declining 7.6%.
Commodities shares also slipped, tracking an 8% drop in crude prices, a 2.8% fall in aluminium prices and a 1.6% drop in copper prices, mainly on worries about global economic growth.
Britain's leading share index slid 5.2% as concerns over demand for raw materials hit heavyweight commodity stocks, while weak data highlighted problems facing the UK economy. The FTSE 100 closed at 4,065.49 points, down 222.52.
A United Nations report said world economic growth would slow to 1% in 2009 from 2.5% this year as the financial crisis bit, and the global economy might even contract if stimulus packages proved too little too late.
The financial crisis that began with a US housing market collapse last year has already knocked several big economies into recession, including the euro zone.
Most economists believe the United States and Britain will soon follow.
