The government's bailout of insurer American International Group failed to quell the turmoil. The key averages closed at their lows of the day.
According to preliminary figures, the Dow fell 449 points to 10,609.
The S&P 500 dropped 57 points to 1,156.
And the Nasdaq composite fell 109 points to 2,098.
Declining issues held a 14 to 1 lead over advancing stocks. Volume on the NYSE came to 9 billion shares. Nasdaq stock market volume was 3.1 billion shares.
Shares of investment banks Morgan Stanley and Goldman Sachs continued to fall sharply.
Light, sweet crude for October delivery rose $6.01 to settle at $97.16 a barrel on the New York Mercantile Exchange.