"We're going to move in the opposite direction of oil, and General Motors is going to go out of business, at least according to Goldman Sachs," said Art Hogan, chief market strategist at Jefferies & Co.
The Dow Jones Industrial Average tumbled 358.41 points, or 3%, to 11,453.42, leaving it down nearly 1,200 points, or 9.4%, for the month, with one trading day yet to go. As things stand, the month is the worst June so far since 1930 when the index declined 17.72%.
"It was the middle of March that the Bear Stearns debacle became public, sending the Dow to a low of 11,731. That level was broken within the first minute of trading today," wrote Kathy Lien, chief strategist of DailyFX.com.
Cautious outlooks from Research In Motion Ltd., Oracle Corp. and Nike Inc. added to the gloom.
General Motors weighed most heavily on the blue chips, down 10.8%, after Goldman Sachs told clients to unload their positions in the face of the deteriorating automotive climate. .
All of the Dow's 30 components closed in negative territory.
"The real problem is even though [the] Fed attempted to be more hawkish, it was not supportive enough of the dollar," Hogan said.
Crude-oil futures climbed to new heights, as weakness in the U.S. dollar, influenced by the Federal Reserve's decision to stand pat on interest rates, sent prices past $140 a barrel.
Crude for August delivery reached a high of $140.39 a barrel in electronic trading on Globex. The contract closed at a record $139.64 on the New York mercantile Exchange, up $5.09, or 3.8%, for the session after trading as high as $140. .
"One thing is for certain, if crude continues to rally, stocks are dead," said Dale Doelling, chief market technician at Trends In Commodities.
"If stocks have another day like this tomorrow, then the fallout next week could include government intervention in the markets," said Doelling.
The S&P 500 Index fell 38.82 points, or 2.9%, to 1,283.15, with all 10 of the index's industry groups losing ground.
Financials led sector declines, off 4.1%, followed by industrials, down 3.7%, and consumer discretionary, which declined 3.5%.
The Nasdaq Composite Index shed 79.89 points, or 3.3%, to 2,321.37.
Volume on the New York Stock Exchange topped 1.5 billion, and declining stocks outdid those advancing more than 5 to 1. On the Nasdaq, nearly 998 million shares traded, and decliners raced beyond advancers 11 to 3.
The indexes furthered their losses as government data illustrated ongoing weakness in the labor market. .
In addition, there was a 1% annualized increase in gross domestic product in the first quarter, slightly better than forecast. .
"GDP and existing-home sales were stronger than expected, but jobless claims and the help-wanted index deteriorated, pointing to a weak non-farm payrolls report next Thursday," according to Lien.
U.S. stocks ended Wednesday with moderate gains after the Federal Reserve held interest rates at 2% and took a step toward preparing the market for rate hikes down the road.
On the housing front, builder Lennar Corp. narrowed its quarterly loss but said housing-market conditions will deteriorate.
"I am asked regularly as to whether or not we are at the bottom, and I feel overall that we are not there yet," said Stuart Miller, Lennar's chief executive, in a conference call
Goldman Sachs cut its rating on U.S. brokers to neutral from attractive, and put Citigroup Inc. on its conviction sell list.
Research In Motion tumbled 13.3% after it reported dubling its revenue and earnings in its first quarter, but also signaled its plan to ramp up spending to sustain growth.
Nike reported a 12% profit rise for the fourth quarter to May 31 on Europe and Asian growth, but noted that U.S. orders were flat.
Oracle dropped 5% after it said its fiscal fourth-quarter net rose 27% but issued profit guidance for the first quarter at the low end of analyst expectations.
Separately, a report in The Wall Street Journal said that Anheuser-Busch Cos. will formally reject InBev's $46 billion takeover offer and announce a plan to shed its theme-park division.
In Asia, the Nikkei 225 fell marginally, the Tokyo index's sixth straight loss. .
The FTSE 100 closed down 2.6% in London.
By Kate Gibson