Al Jazeera's John Terrett, reporting from New York, said that consecutive days of growth is needed to curb increasing fears.

"A brief spike in the graph won't help this situation, as a consistent pattern of growth will boost confidence," he said.

Further decline

The Dow Jones industrial average was down 312.62 points, or 3.60 per cent, at 8,378.63.

The Nasdaq Composite Index was down 51.88 points, or 3.23 per cent, at 1,552.03.
   
However, the US losses did not quite live up to investors' worst fears at the start of the day.
   
Before the market opened, stock futures fell so steeply that they had to be frozen after triggering a limit down.

Losses at the open were not as severe, however, and by midday, stocks had come off their lows before declining once again.
   

Investors continue to fear the global economy is in the throes of a recession [AFP]
News that existing-home sales in the United States rose 5.5 per cent last month - the biggest gain since July 2003 - did increase investor confidence since the housing market has been at the centre of the current economic turmoil.
   
The recent turmoil, however, has lowered the bar for a "good day" on Wall Street.
   
"Amazingly enough, we're not down more than this," said David Henderson, a floor member at the New York Stock Exchange.
   
"The market is showing some signs that there are value buyers out there."
  
World stocks, measured by MSCI's all-country world index, were down 4.22 per cent but had trimmed their losses after hitting five-year lows during the session.

Britain 'in recession'

In the UK, the office for national statistics confirmed that Britain is on the brink of recession.

The office said output fell by 0.5 per cent, a bigger-than-expected drop, knocking shares and weakening the pound.
   
Meanwhile, European shares had their lowest close since mid-2003, with the FTSEurofirst 300 index of top European shares closing down 4.93 per cent at 829.73 points.
   
"I sense we've moved beyond the credit crisis. There's a recognition of the damage inflicted on the global economy, that is the recession, by the credit crisis," said Mike Lenhoff, strategist at Brewin Dolphin.
  
"It's not just limited to the developed world. You can run but you can't hide anywhere."