Feb. 24--Stocks tumbled Monday to lows not seen for 12 years as pessimism about the economy and corporate profits led more investors to give up on the market and shed their shares.

The Dow Jones industrial average dropped more than 3% to finish at 7,114.78, its lowest close since 1997.

"I think what's driving the market lower now is the fact that the economy and corporate earnings are falling even faster than stock prices are," said Bruce Bittles, an economist and chief market strategist for Milwaukee's Robert W. Baird & Co.

Analysts also were in agreement Monday that uncertainty about banks and the financial system is an enormous drag on investor confidence. They faulted the Obama administration in part, saying it has not yet laid out a clear plan on how it will deal with the financial crisis, including the major national banks that are struggling. Bank regulators have said they will launch a revised bank rescue plan this week.

"There is major stimulus coming into the economy later this year, and we need to fortify these banks and develop a reasonably thought-out plan and then go with it," said Terence V. Pavlic, president and portfolio manager of Pavlic Investment Advisors Inc., Delafield.

Said Bittles: "There is no question the uncertainty surrounding what's happening with banks and the administration's efforts are causing the market grief."

With its plunge of 250.89 Monday, the Dow so far this year is down 18.9%. It has lost 14% in just the last 10 trading sessions.

The Standard & Poor's 500 Index lost 26.72, or almost 3.5%, Monday to close at 743.33. The Nasdaq Composite Index was off 53.51, or 3.7%, to finish at 1,387.72. For 2009, the S&P has declined 17.7% and the Nasdaq is 12% lower.

The biggest loser Monday among companies based in Wisconsin was the banking firm Baylake Corp., of Sturgeon Bay, whose shares plummeted 35.4% to close at $1.55. Some other Wisconsin firms losing ground were Marcus Corp., down 12.1%; Joy Global Inc., off 11.8%; and Sonic Foundry, which lost 10.5% on the day.

The largest gain went to Merge Healthcare Inc., at 7.4%.

Sustained crash

Pavlic said that in past markets, there typically has been a "major capitulation day" -- a day when investors in despair over the stock market outlook throw in the towel all at once. Not this time.

"We've kind of had this rolling capitulation," Pavlic said.

Jay Mueller, an economist and portfolio manager for Wells Fargo Advantage Funds in Menomonee Falls, said the market is reflecting a drop in confidence about corporate earnings based on pessimism or uncertainty about an economic recovery.