Dow falls under 10000 as financials weigh on market

NEW YORK (CNNMoney.com) -- Stocks plunged at the Monday open after a deepening financial crisis in Europe heightened worries about a global economic slowdown.

The S&P, Dow and Nasdaq were sharply lower, following a broad sell-off around the world.

The Dow dropped 280 points immediately at the open, approaching the 10,000-point benchmark, before bouncing back a little to a 202-point decline The Nasdaq and S&P each fell about 2.3%.

Japan's Nikkei index plunged 4.3% to close at a four-year low. European indexes - the Britain's FTSE 100, Germany's Xetra DAX 100 and France's CAC 40 - were down about 5% as investors looked beyond the bailout, focusing instead on Europe's growing crisis.

"It's this fear factor ... continuing to grow," said Peter Cardillo, chief market economist for Avalon Partners, before the market open. "It's becoming like a cancer which is spreading all over the place."

The White House said the government was working to alleviate the international crisis.

"The Treasury Department, the Federal Reserve, and other agencies and regulators are working together and with their counterparts overseas to address the global financial crisis," said White House deputy press secretary Tony Fratto. "Their aim is to provide market stability and improve confidence."

"It will take time to implement some new authorities, but we're confident that sustained attention to root causes of the crisis will over time increase stability and confidence," said Fratto.

Also, the Federal Reserve said it would double to $300 billion the amount it loans to financial institutions in need of short-term capital.

To examine how Wall Street got to such a sorry state, the House Committee on Oversight and Reform will begin a two-day hearing at 10 a.m. ET. On Monday, the committee will examine the causes and effects of the Lehman Brothers bankruptcy, with former Lehman CEO Richard Fuld expected to testify.

"Lax oversight and reckless investments on Wall Street are causing massive disruption throughout our economy," said Waxman, in a prepared statement. "Our hearings will examine what went wrong and who should be held to account."

On Tuesday, the committee will examine the government bailout of insurance giant AIG (AIG, Fortune 500).

Last week, the Dow Jones industrial average plunged nearly 818 points, or 7.3%, marking its worst week in nearly two months. Despite the House finally passing a tweaked bailout bill Friday, investors continue to worry that the bill won't be enough to stem the global economic slowdown.

Credit crunch: Adding to the dour mood on Wall Street, credit markets have remained frozen, with the 3-month Libor - the rate banks charge each other to borrow for three months - rising to an eight-month high on Friday, according to Bloomberg.

Other markets are also taking a beating. Crude prices fell below $90 a barrel for the first time since February in early trading Monday. And the U.S. dollar tumbled against the yen, although the greenback managed to make modest gains versus the euro and the British pound.

Over the weekend, Germany guaranteed all private bank accounts and helped work out a $69 billion bailout deal for Hypo Real Estate AG. Furthermore, French banking giant BNP Paribas said it would take a 75% stake in the remaining operations of troubled Belgian bank Fortis NV.

European Union finance ministers were slated to meet Monday and Tuesday to discuss ways to boost the battered banking system. Italian Prime Minister Silvio Berlusconi is pushing is bailout similar to the one signed by President Bush on Friday.

In the United States, the Federal Open Market Committee may lower the federal fun rate, currently at 2%, to fire up the economy. But Cardillo of Avalon said that wouldn't have much impact.

"Lowering short term rates is not going to be the answer," said Cardillo. "If they did that, they might cause the market to have a positive reaction, but the situation doesn't really change."

Companies: Drug company Eli Lilly (LLY, Fortune 500) said it would buy ImClone (IMCL), the biotech that produces colon cancer treatment Erbitux, for $6 billion.