NEW YORK (MarketWatch) -- The Dow Jones Industrial Average fell as much as 800 points to trade below the 10,000 mark Monday as nervousness over the credit crisis spread after the U.S. government's $700 billion bailout and interventions in Europe only seemed to add to investor anxiety.

But hopes of a coordinated intervention to stop the bleeding in global markets helped the Dow DJIA, -0.47% recoup half of its losses, to close down 369 points, or 3.6%, to 9,955.

"We could have a bounce tomorrow, especially if we get a coordinated rate cut by the three main central banks, [in the U.S., Europe and the U.K.]," said Robert Pavlik, market strategist at Oaktree Asset Management.

"That would send a message to the market that they're cognizant of the problems and they're ready to do something about it."

On the Dow, Citigroup Inc. C, -2.12% fell 5.1%, Bank of America BAC, -1.32% dropped 6.6% and J.P. Morgan Chase JPM, -0.84% lost 4.1%.

The blue-chip average earlier fell by as much as 800.06 points, its biggest intraday drop on record. The Dow still closed below the 10,000 mark for the first time since Oct. 26, 2004.

"Investors are right on the edge," said Hugh Johnson, chairman of Johnson Illington Advisors. "For a while it was denial, then it turned to anxiety, and now it's closer to fear," he said. "I wouldn't call it panic, but there is some evidence of the beginning of a race to the exits."

The market's fear gauge, or VIX VIX, +0.30% , earlier spiked to a record high of 57.55, "screaming to the upside as it's supposed to when the market is in crash mode," said Eliot Spar, market strategist at Stifel Nicolaus.

Amid concern that financial pain is spreading to industries linked to global growth, energy shares, along with those of materials stocks, also fell sharply. Also on the Dow, shares of aluminum giant Alcoa Inc. AA, -4.65% , which is expected to post quarterly results Tuesday, fell 5.9%. Equipment-maker Caterpillar Inc.'s CAT, -0.18% stock fell 4%.

"Right now, it's about stabilizing the financial system and then see how much collateral damage has been done to the economy," said Owen Fitzpatrick, head of U.S. equity at Deutsche Bank.

"The clear message is that the global economy is slowing rapidly, and the magnitude of the slowdown is starting to be realized by the market."

Crude-oil futures closed at $87.81 per barrel on the New York Mercantile Exchange, down $6.07, or 6.5%. Read Futures Movers. Treasury bonds rallied along with gold as investors sought safe havens from market volatility. Read Bond Report. Read Metals Stocks.

"The signal from equity markets is clear," said Robert Kavcic, economist at BMO Capital Markets. "Recession. Possibly a bad one."

Europe's turn

President Bush signed an emergency legislation into law Friday just as the latest U.S. employment report showed 159,000 jobs lost in September. And last week, the Dow lost 7.4%, the S&P 500 fell 9.4% and the Nasdaq lost 10.8%.

On Monday, shares in Europe saw their biggest one-day fall on record, with the pan-European Stoxx 600 index (SXXP) sliding 7.6%. European governments didn't reach a common deal on bailouts over the weekend. Instead each country is handling the fallouts on its own. See full story.

In The U.S., the S&P 500 SPX, -0.48% fell 42 points, or 3.9%, to end at 1,056 and the Nasdaq Composite COMP, -0.29% lost 84 points, or 3.8%, to finish at 1,862, led by a 5.5% decline in shares of eBay EBAY, -2.57% , which announced it was slashing 10% of its workforce.

Trading volumes showed 1.9 billion shares exchanging hands on the New York Stock Exchange, and 1.5 billion shares trading on the Nasdaq. Declining issues topped gainers by 15 to 1 on the NYSE and by 6 to 1 on Nasdaq.

"We've had the passage of [the $700 billion] bailout but it will take time for it to start getting traction," Fitzpatrick said.

The Treasury is not expected to start buying ailing assets for at least six weeks, analysts said.

Among financial shares, National City NCC, -3.43% plunged more than 25%, after credit agency Fitch downgraded its ratings on the bank on concerns over its liquidity.

Wells Fargo WFC, -2.35% , meanwhile, appeared to have the upper hand in its battle with Citigroup C, -2.12% for the chance to take over Wachovia WB, -3.74% . See full story.

Outside of banks, Eli Lilly LLY, -1.24% reached a deal to buy ImClone Systems IMCL for $6.5 billion, or $70 a share in cash.

Coca-Cola KO, -0.73% was downgraded to hold by Deutsche Bank on the potential for slower volumes at home and abroad as well as currency headwinds.