NEW YORK -- Wall Street stocks skidded to one of the year's worst losses as oil surged over $140 for the first time ever and swamped markets already sinking under the weight of revived credit fears.
Concern mounted over more write-downs at major U.S. banks as investment bank Goldman Sachs sent an alarming note to clients about further losses. A separate Goldman note on the auto industry's woes sent General Motors stock plunging to its worst level in 53 years.
The dollar retreated broadly as investors discounted the chance of a U.S. interest rate hike any time soon after the Federal ReserveWednesday held rates at 2 percent. That boosted the euro to a record high of 169.45 against the yen.
Oil prices surged nearly 4 percent to a record over $140 a barrel after Libya said it was studying ways to cut output in response to potential U.S. actions against producer countries.
Crude was boosted earlier in the day by the weak dollar and comments by OPEC President Chakib Khelil who said prices could rise as high as $170 this summer.
A broad rally in agricultural commodities, which have been pummeled by the worst flooding in the U.S. heartland in 15 years, pushed corn prices to an all-time high as grains rallied in tandem with oil and gold, and fed fears that inflation will soon rage.
"The inflationary markets are running higher," said grains analyst Don Roose of U.S. Commodities, referring to active buying in the grain, gold and energy markets.
Gold ended nearly 4 percent higher as funds poured into commodities due to tumbling stocks after oil surged and boosted bullion's appeal as an alternative investment.
The blue-chip Dow slid 335 points to a 21-month low after Goldman Sachs urged investors to sell bank and automaker shares, fueling concern about the outlook for corporate profits.
Investors found little to lift their spirits amid the barrage of bearish news, and major stock indexes in Europe and the United States fell more than 2 percent.
"The price of oil is now at $140 and there is real concern that global growth is going to seriously slow down and that's hitting all sectors," said Eddie Bakker, managing director of equity sales and trading at Calyon Securities in New York.
Financial stocks plummeted after Goldman Sachs forecast additional write-downs of $8.9 billion at Citigroup and $4.2 billion at Merrill Lynch & Co.
Goldman also put Citigroup on its "conviction sell" list, and a Sanford C. Bernstein analyst said Merrill will take $3.5 billion in write-downs.
Shares of Citigroup fell 6.3 percent and Merrill Lynch & Co. fell 6.8 percent
GM sank 10.8 percent to lows last seen in 1955.
The Dow slid 358.41 points, or 3.03 percent, at 11,453.42. The Standard & Poor's 500 Index fell 38.74 points, or 2.93 percent, at 1,283.23. The Nasdaq Composite Index was down 79.89 points, or 3.33 percent, at 2,321.37.
Banks also led European shares lower. Dutch-Belgian group Fortis was the top percentage loser, sliding almost 19 percent after saying it would shore up its balance sheet with measures worth more than 8 billion euros ($12.54 billion), including issuing new shares.
Barclays shed 5.8 percent, Credit Suisse fell 2 percent and Deutsche Bank slid 3.3 percent.
The FTSEurofirst 300 closed down 2.5 percent at 1,197.02 points in its worst single-day percentage fall since mid-March.
The weaker dollar helped oil prices rebound, along with Libya news and comments by the president of the Organization of Petroleum Exporting Countries.
"I forecast prices probably between $150-$170 during this summer. That will perhaps ease toward the end of the year," Chakib Khelil told France 24 television in an interview.
The euro strengthened because in contrast to the Fed's pause, the European Central Bank has repeatedly said it may lift rates in July to fight inflation,
"The dollar is on the ropes and has further to fall unless the Fed can correct the market perception that U.S. rates are on hold indefinitely," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon.
The benchmark 10-year U.S. Treasury note rose 14/32 to yield 4.043 percent. The 30-year U.S. Treasury bond gained 22/32 to yield at 4.61 percent.
The euro was up 0.59 percent at $1.5761.
The dollar fell against major currencies, with the U.S. Dollar Index down 0.60 percent at 72.47. Against the yen, the dollar fell 1.04 percent at 106.71.
Gold last traded at $912.60/913.60 in New York.
U.S. crude settled up $5.09 at $139.64 a barrel, after hitting an all-time high of $140.39 earlier, eclipsing the previous record of $139.89 a barrel hit June 16. London Brent crude settled up $5.50 at $139.83 a barrel.
"The primary reason bonds are doing so well are the concerns over financials, banking shares are doing particularly badly," said ABN AMRO strategist Harvinder Sian.
Overnight in Asia, stocks and government bonds mostly rose after the Federal Reserve on Wednesday kept rates steady and signaled it was in no hurry to raise them in the near term.
The MSCI index of stocks in the Asia-Pacific region outside of Japan rose 0.7 percent, while the pan-Asia index gained 0.2 percent.
Japan's Nikkei share average closed slightly lower, extending a losing streak to six days.
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