Traders work on floor of New York Stock Exchange as stocks fall in New York Photo: REUTERS

Justin Bohan holds his head as he works at his post on the floor of the New York Stock Exchange, Thursday Oct. 9, 2008 where stocks plunged in the final minutes of trading Photo: AP

Justin Bohan holds his head as he works at his post on the floor of the New York Stock Exchange, Thursday Oct. 9, 2008 where stocks plunged in the final minutes of trading Photo: AP

Higher borrowing costs and slower consumer spending have left carmakers, insurers and energy companies fearing they will be the next victims of the financial crisis.

The Dow fell 678.91 points, or 7.3 per cent to end at 8,579.19 at the close. It had not fallen below 9,000 since August 6, 2003.

Shares in the United States have now lost 20 per cent of their value in the last week.

A year ago, the Dow closed at a record high above, 14,000.

In the UK, the FTSE 100 finished lower than any time since August 2004 after another one per cent fall, on top of Wednesday's five per cent tumble.

President Bush will make a statement on the global financial meltdown on Friday to assure Americans that their leaders are grappling with the crisis, the White House said.

Mr Bush will "assure the American people that they should be confident that economic officials are aggressively taking every action to stabilize our financial system," said spokeswoman Dana Perino.

Wall Street had begun the day on a better footing on news the Bush administration was considering taking part ownership in a number of US banks.

The aim of such a move would be to thaw the lending freeze threatening to push the world's economy into recession.

It soon fell however after declines in companies such as General Motors, whilch fell 31 per cent to its lowest level since 1950.

Car manufacturer Ford also fell by 22 per cent.

President George W Bush had earlier said he had a "desire to work with our European friends to develop, as best as possible, a common policy" to tackle the global financial crisis.

He said: "The United States will take strong action in dealing with the current economic situation."

Arthur Hogan, chief market analyst at Jeffries & Co, an American investment bank, said "The story is getting to be like that movie Groundhog Day."

He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains high despite the Federal Reserve's recent rate cut.

He added: "Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks.

"Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."

The scale of the problem was shown by the National Debt Clock near Times Square in New York, as it ran out of digits.

The federal government's current debt stands at about $10.2 trillion (£5.9 trillion) and, as a short-term fix, the digital dollar sign on the billboard-style clock has been switched to the figure "1".