The Dow Jones industrial average plunged to a new bear market low Thursday, dashing some investors' hopes that they'd seen the worst last year.

After a rocky but mostly down day of trading, the Dow fell 89.68 points, or 1.2%, to 7465.95. Seeing the Dow plunge below the previous bear market low of 7552.29 set in November was not welcome news.

"Now it's going to get ugly," says Joseph Saluzzi, trader at Themis Trading. "Investors were on a rope bridge with one rope already broken. Now the other rope has broken. Where you'll land, nobody knows."

Meanwhile, the Standard & Poor's 500 and Nasdaq also suffered big losses but remain above their bear market lows. The S&P 500 fell 9.48 points, or 1.2%, to 778.94. And the Nasdaq fell 25.15 points, or 1.7%, to 1442.82.

Frustrated by the lack of clarity on the Obama administration's plans to remedy the financial and housing crises, investors are reluctant to buy stocks, says John Derrick of U.S. Global Investors. "Policy uncertainty is leaving the market uncertain," he says.

The latest round of selling started Tuesday, following a weekend of poor economic news from Asia and Europe.

Much of the U.S. market's pain remains concentrated with the financials. The Financial Select Sector SPDR exchange traded fund fell 5.3%, to push its loss this year to 39.7%. Shares of Bank of America fell 64 cents, or 14%, to $3.93, Citigroup lost 40 cents, or 14%, to $2.51, and JPMorgan Chase lost 91 cents, or 4.2%, to $20.60.

Meanwhile, the price of insurance to protect investors from the risk of default by large financial firms jumped 5.5% to levels not seen since October, Credit Derivatives Research says. When the price on this insurance rises, it indicates increasing nervousness over the financial health of the banks.

Constant talk by public officials about the possibilities of the nationalization of banks is causing a "run on the bank stocks," says Jim Paulsen of Wells Capital Management.

Even so, Paulsen thinks investors would be making a mistake to read too much into the Dow's new bear market low. Since November, when the lows were first set, the corporate bond market has calmed. Also, it's typical for a bear market to breach lows several times on lower trading volume while bottoming, he says. "There are not that many sellers left," Paulsen says. "The last thing you want to do is sell." (c) Copyright 2009 USA TODAY, a division of Gannett Co. Inc.

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