NEW YORK (MarketWatch) -- U.S. stocks on Thursday sprinted to fresh five-year lows, with the major indexes slammed for a seventh straight session as financial shares and General Motors Corp. tanked and global credit woes spurred panic-stricken investors to flee equities.

"There are only two things that will turn this market around: One is any sign that the credit markets are thawing out, and the second is we finally find a level at which stocks have finally become too cheap," said Art Hogan, chief market strategist at Jefferies & Co.

One year to the day after climbing to its peak of 14,164.53, the Dow Jones Industrial Average DJIA, -0.47% sank 678.91 points, its third-largest point loss on record, to finish at 8,579.19, pushing the blue-chip index under the 9,000 level for the first time since August 2003.

The Dow's close leaves it 5,585.34 points, or 39.4%, under its year-ago high.

All of the Dow's 30 components closed under water.

"Indicators on the state of the credit markets have improved over the past two days but the improvement has not been enough to turn the tide on the equity market's slide," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.

With Standard & Poor's threatening a possible downgrade, General Motors Corp. GM, -2.37% was the heaviest weight on the Dow industrials. The stock fell 31.1%, making its first dip below $6 a share since 1951. Read full report.

Off the Dow, shares of Ford Motor Co. F, -1.34% slid 21.8%.

Among the blue-chip index's few bright spots during the session, IBM IBM, -0.64% erased its earlier gains to fall 1.7%, after the industry bellwether released its third-quarter earnings ahead of schedule, reporting a 20% profit rise and reiterating its 2008 outlook. See full report.

The S&P 500 Index SPX, -0.48% fell 75.02 points, or 7.6%, to 909.92, with the financial sector fronting sector losses that stretched across the S&P's ten industry groups.

Noteworthy laggards among financial shares included XL Capital Ltd. XL, +5.55% , its shares down 53.8%, while Lincoln National Corp. LNC, -3.46% dropped 34.5%.

Wachovia Corp. WB, -3.74% , American International Group Inc. AIG, -1.23% , , and KeyCorp KEY, -2.47% were all down 20%.

Consumer discretionary stocks also took a hit, including retailer Abercrombie & Fitch Co. ANF, -5.42% , down 14.8% in the wake of its profit warning. Read Retail Stocks.

After treading in positive turf for part of the session, the Nasdaq Composite Index COMP, -0.29% lapsed into the red, ending down 95.21 points at 1,645.12.

Volume on the New York Stock Exchange topped 2 billion, and declining stocks outran those advancing 10 to 1. On the Nasdaq, nearly 1.4 billion shares traded, with decliners surpassing advancers nearly 5 to 1.

In commodities trade, gold fell, with the contract for December delivery dropping $20 to end at $886.50 an ounce on the New York Mercantile Exchange. Read Metals Stocks.

Oil futures for November delivery fell $2.36 to $86.59 a barrel, its lowest closing level so far this year. See Futures Movers.

Rate cuts

The stock market's continued decline comes one day after the U.S. Federal Reserve, European Central Bank, Bank of England and other central banks made coordinated rate cuts. The moves seemed to make little impact on Wednesday with the Dow industrials dropping 189 points, the Nasdaq Composite falling 14 points and the S&P 500 shedding 11 points.

"Despite the poor close, I do think we are finally at the point where the short-term downside risk is minimal. While the upside might take time to develop, recession, earnings and a credit crisis are discounted," said Marc Pado, U.S. market strategist at Miller Tabak.

"The market could still go down another 10% or so from here just purely on momentum," according to Paul Nolte, director of investments at Hinsdale Associates. Hear Nolte.

The Treasury Department is considering a plan to take ownership stakes in many U.S. banks, both healthy and troubled. Treasury Secretary Henry Paulson said in a speech Wednesday that he has the authority to do so under the $700 billion bailout plan. See full story.

Britain on Wednesday announced a similar plan, though no U.K. bank as yet has taken government cash.

"If Paulson heeds the advice of [U.K. Prime Minister Gordon] Brown and [Chancellor Alistair] Darling, the chances that the U.S. economy will be steered away from a deep recession extending through 2009 will be greatly improved," said economists at RDQ Economics.

In a related note, the Fed late Wednesday said it's going to lend $37.8 billion in additional cash to American International Group Inc. AIG, -1.23% for domestic life insurance subsidiaries in return for investment grade fixed-income securities. See the Fed.

Stock futures had held an early advance after the Labor Department reported a decline in weekly jobless claims, which fell by 20,000 to 478,000 last week. Read Economic Report.

Overseas, Iceland nationalized its largest bank, Kaupthing, as a financial crisis deepened, meaning all three of its key banks are now under government control. See details.

In Russia, equities rebounded after tumbling earlier in the week, with oil and gas shares leading the rally and forcing Moscow's stock exchanges to suspend trading once again. Read Emerging Markets.

A stock rally in London proved short lived, with the FTSE 100 index falling 1.2%. See London Markets.

In Asia, markets ended mixed after a volatile session. Read Asia Markets.