Dow Crushed- Down 700

NEW YORK (CNNMoney.com) -- Stocks tanked Monday, with the Dow, S&P 500 and Nasdaq falling to nearly five-year lows as credit markets seized up and European governments' rush to prop up failing financial firms underscored the global reach of the credit crunch.

Credit markets remained tight, with two key measures of bank jitters hitting an all-time high. Treasurys rallied, lowering the corresponding yields as investors sought safety in government debt. Gold rallied for the same reason. Oil dipped. The dollar jumped versus the euro and fell against the yen.

The Dow Jones industrial average (INDU) lost as much as 604 points before pulling back a little bit, hitting the lowest level during a session since Nov. 24, 2003, when it touched 9629.83.

The Standard & Poor's 500 (SPX) index fell 7.7%, hitting its lowest point since Sept. 12, 2003. The Nasdaq composite (COMP) lost 7.9%.

The spate of bank rescue in Europe were reminding people that the crisis is a global one, said Todd Salamone, senior VP of research at Schaeffer's Investment Research. At the same time, investors were also digesting the passage of the $700 billion bank rescue bill.

He said that initially there was uncertainty about whether the bill would be passed after the House shot down the first version. Now there's uncertainty about how much it will help.

Investors are also showing disappointment that the Federal Reserve hasn't stepped in to announce an emergency interest-rate cut, said Ben Halliburton, chief investment officer at Tradition Capital Management.

"It looks like panic capitulation, but there's no telling how long it will last," Halliburton said.

"The concern is that we will roll into a very severe recession or even a depression," he said. "Purchases that require financing are extremely difficult to pull off currently and that's going to have a severe impact on the economy."

A CNN/Opinion Research poll showed that nearly 60% of Americans think another economic depression is likely. (Full story)

A measure of investor fear surged, with the CBOE Volatility index (VIX), or the VIX, at a 19-year high.

Salamone said this shows nervousness on a short-term basis is rising, but not enough to signal a stock market bottom is forming. "Fear is getting higher, but it's not at panic levels that have implied major market bottoms in the past," he said.

Bailout questions remain: Stocks slumped Friday, as Wall Street's worst week in seven years ended with President Bush signing the historic $700 billion bailout bill after weeks of contentious debate. The bill involves the Treasury buying bad debt directly from banks in order to get them to start lending to each other again. (Full story)

President Bush said Monday that the purposed of the package was to loosen up the nation's credit markets to "get money moving again," AP reported. However, Bush said "it's going to take a while," for the program to start working. "We don't want to rush into the situation and have the program not be effective."

Also on Monday, the Treasury Department issued interim rules for hiring money managers for the program as well as conflicts of interest.

But the bill won't help loosen up credit markets in the near term, and with cash still scarce, investors remained on edge.

The Federal Reserve attempted to address this Monday by making an additional $300 billion available to banks in return for a broad range of damaged assets. That raises the amount available to banks to $600 billion as of Monday and the Fed could expand that to $900 billion by the end of the year. (Full story)