Wall Street walloped

NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday afternoon, as worries about the credit and mortgage market crisis, record-high oil prices and the outlook for the consumer gave investors plenty of reasons to bail ahead of the Thanksgiving holiday.

The Dow Jones industrial average (Charts) lost around 100 points or 0.8 percent around 2-1/2 hours into the session. The S&P 500 (Charts) index lost 0.9 percent and the Nasdaq composite (Charts) lost 1.1 percent.

Stocks had been even weaker in mid-morning trading.

Stocks have been whipsawed lately as investors have muddled through the ongoing housing and credit market turmoil, eyed the weak dollar and fretted over oil prices near $100 a barrel. On Tuesday the Fed issued a sluggish 2008 economic outlook, confirming other signs of a slowdown.

Wednesday's index of leading economic indicators and consumer sentiment readings added to the lackluster growth outlook.

Additionally, the Mortgage Banker's Association reported a 3.6 percent drop in applications last week. Separately, 47 of the 50 states saw a drop in existing home sales in the third quarter, according to a National Association of Realtors report.

"Equity markets are reacting to the economic slowdown," said Michael Strauss, chief economist at Commonfund. "There is some worry about the consumer, about discretionary business spending and about the financial sectors of the economy."

He said that there may also be some worry that the Federal Reserve is behind in addressing these issues.

Treasury prices rallied, sending the corresponding yields lower, as investors sought safety in the comparably safer haven of bonds. The benchmark 10-year note fell below 4 percent for the first time in two years.

"There's a pretty strong flight-to-quality there," Strauss said. "There's a clear bet that the Fed has further to go, even if the Fed doesn't realize it."

Policy makers meeting on Dec. 11 are widely expected to cut the fed funds rate, a key short-term interest rate by a quarter-percentage point.

Among stock movers, Freddie Mac (Charts, Fortune 500) shares continued to slip after plunging nearly 27 percent Tuesday. The government-sponsored mortgage backer reported a steep quarterly loss Tuesday and a $1.2 billion writedown due to credit losses.

Fellow mortgage lenders Fannie Mae (Charts), Countrywide Financial (Charts, Fortune 500) and Washington Mutual (Charts, Fortune 500) slipped too.

Big banks slumped, including Merrill Lynch (Charts, Fortune 500), Lehman Brothers (Charts, Fortune 500) and Morgan Stanley (Charts, Fortune 500).

Declines were broad based, with 25 out of 30 Dow components falling, led by AIG (Charts, Fortune 500), American Express (Charts, Fortune 500), General Motors (Charts, Fortune 500), Home Depot (Charts, Fortune 500) and Intel (Charts, Fortune 500).

Intel was one of many chips falling, including Advanced Micro Devices (Charts, Fortune 500) and Micron Technology (Charts, Fortune 500). Micron slumped for a second session after a Morgan Stanley analyst initiated coverage of the company Tuesday with an "underweight" rating, AP reported.

Market breadth was negative. On the New York Stock Exchange, losers beat winners three to one on volume of 630 million shares. On the Nasdaq, decliners topped advancers by more than two to one as 900 million shares changed hands.

In economic news, the October index of Leading Economic Indicators (LEI) fell 0.5 percent, after rising 0.1 percent in the previous month, suggesting that the economic slowdown could accelerate in the months ahead. Economists surveyed by Briefing.com thought LEI would fall 0.3 percent.

The November consumer sentiment index from the University of Michigan showed a rise to 76.1 from an initial reading of 75.0, but was down from last month's 80.9. Economists thought it would hold steady, on average.

The number of Americans filing new claims for unemployment last week fell by 11,000, as expected.

U.S. light crude oil for January delivery fell $1.63 to $96.40 a barrel on the New York Mercantile Exchange, after having hit a record high of $99.23 in electronic overnight trading.

Oil prices were volatile after the release of the weekly oil inventories report, which showed a surprise drop in crude supplies.

COMEX gold for December delivery rose $5.60 to $797 an ounce.

In currency trading, the dollar fell versus the yen and inched higher versus the euro.

All financial markets are closed Thursday for the Thanksgiving holiday and have an abbreviated session on Friday, ending at 1:00 p.m. ET.