The Dow fell sharply again even amid growing support in Washington for an economic stimulus package.
The Dow finished more than 300 points down on Thursday, the same day Federal Reserve Chairman Bernanke testified before a house committee about the bleak outlook of the U.S. economy.
Bernanke said an economic stimulus plan that would put money into the hands of low- and moderate-income families would be more effective than other strategies to jump-start the economy.
"Putting money into the hands of households and firms that would spend it in the near term is a priority," Bernanke said.
President George W. Bush also came out publicly for a stimulus plan and talks began with Congress about what would be in the package.
Fresh economic data have failed to make investors feel any better about the outlook. That includes word from the Commerce Department that construction was started on 1.353 million new homes and apartments last year, down 24.8 percent from 2006. It was the second biggest annual decline on record, exceeded only by a 26 percent plunge in 1980, a period when the Federal Reserve was pushing interest rates to post-World War II records in an effort to combat an entrenched inflation problem.
In the final hour of trading, the Dow was down as many as 320 points, marking a decline of more than 2 percent.
Earlier Thursday, Merrill Lynch posted a massive loss that provides further evidence of Wall Street's stress from credit problems. The world's largest brokerage said it lost $9.9 billion in the fourth quarter, with massive write-downs from investment and trades battered by the ongoing credit crisis.
