US stocks plunged on Wednesday, with key indices closing at 5 year lows, after Federal Reserve came out with dismal outlook for US economy. Uncertainty over the fate of Detroit's automakers and Citigroup continued to spook investors.

The Dow Jones Industrial Average sank 427.47 points, (-5.07%), to close at 7,997.28. The S&P 500 tumbled 52.54 points (-6.12%) to 806.58. The Nasdaq Composite shrank 96.85 points (-6.53%) to 1,386.42.

In its FOMC minutes released on Wednesday, the Fed said "participants generally expected the economy to contract moderately in the second half of 2008 and the first half of 2009 and agreed that the downside risks to growth had increased." The report indicated that Federal Reserve may very well slash interest rates below 1% in its next meeting. "Some suggested that additional policy easing could well be appropriate at future meetings," the report said adding that "in any event, the Committee agreed to take whatever steps were necessary to support the recovery."
 
Economic data continued to disappoint. A release by Department of Labor on Wednesday showed consumer price index dropped a record 1% in October as energy costs slumped. It was the largest decline in consumer prices since publication of seasonally adjusted changes began in February 1947. Economists had forecast a drop of 0.8% in consumer prices. The core consumer price index, which excludes food and energy, declined 0.1% in October. Economists had expected a marginal rise of 0.1% in core consumer price index.

A Department of Commerce release showed housing starts fell a record 4.5% in October to seasonally adjusted annual rate of 791,000, the lowest since records began in 1959. Economists had projected Housing Starts to decline to an annual rate of 780,000. Building Permits dropped 12% to annual rate of 708,000. Economists had forecast building permits to decline to 772,000 in October.

Another release by Mortgage Bankers Association on Wednesday showed mortgage applications fell a seasonally adjusted 6.2% last week from the previous one, as lower interest rates on fixed-rate mortgages failed to attract prospective homebuyers.

Citigroup (NYSE: C) plunged $1.91 or 22.85% to close at $6.45 after it announced that is buying $17.4 billion of remaining assets held by the structured investment vehicles, as the bank moves to unwind the troubled funds that it has been supporting since December 2007.

Bank of America Corp. (NYSE: BAC) plummeted $2.13 or 14.02% to $13.06. J.P Morgan (NYSE: JPM) dropped $3.67 or 11.42% to $28.47.Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) fell over 11% and 14% respectively.

General Electric Co. (NYSE: GE) subtracted $1.61 or 10.02% to $14.45.

Insurance stocks slumped. Lincoln National Corp (NYSE: LNC) slid $4.85 or 39.88% to $7.31. Shares of Hartford Financial Services Group (NYSE: HIG) lost$ 2.76 or 28.63% to finish at $6.88.