* Global markets sell off on credit, recession fears
* Volatility sways market widely, between gains and losses
* Morgan Stanley, Goldman Sachs slump on rating threat
* Energy shares fall in sync with oil prices
* General Motors says bankruptcy not an option
(Updates to midday)
By Ellis Mnyandu
NEW YORK, Oct 10 (Reuters) - U.S. stocks slid on Friday,
as panicked investors unwound risky bets in a global sell-off
on fears that tighter credit would spawn world recession.
Volume was heavy across the board and trading was
volatile, with all three major U.S. stock indexes gyrating
widely between steep losses and gains since the open.
Shares of Morgan Stanley <MS.N>, an investment bank that
recently converted to a bank holding company, lost 36 percent
to the lowest in over a decade after ratings agency Moody's
warned it might cut the company's long-term debt ratings and
those of rival Goldman Sachs <GS.N>.
At one point, the Dow Jones industrial average slid as
much as 8 percent to break below 8,000 for the first time
since April 1, 2003, and then briefly turned positive, along
with the broader market as expectations that the sell-off
might be overdone collided with fears of more losses.
"There's no confidence -- there's an atom or two of
confidence returning," said Steve Goldman, market strategist
at Weeden & Co. in Greenwich, Connecticut.
"We need confidence to return into the banking system and,
hopefully, we can sort our way through this. There's still the
unknown. It's just at this point bargain hunting."
The Dow Jones industrial average <> was down 457.26
points, or 5.33 percent, at 8,121.93. The Standard & Poor's
500 Index <.SPX> was down 52.29 points, or 5.75 percent, at
857.63. The Nasdaq Composite Index <> was down 69.93
points, or 4.25 percent, at 1,575.19.
Uncertainty about what authorities would do next to
contain fallout from the credit turmoil contributed to the
fear, driving the Chicago Board Options Exchange Volatility
Index <.VIX> up 14 percent to another intraday record high
above 73.
Morgan Stanley shares slumped to $7.94 on the New York
Stock Exchange.
Goldman Sachs shares fell 23 percent to $78.10 on the New
York Stock Exchange. Investors worry that a cut in ratings
would further complicate the companies' ability to raise
capital.
Shares of energy companies dragged on the broader market
as oil prices sunk to a fresh 12-month low below $79 a barrel
on signs that a faltering global economy will crimp demand for
crude.
Shares of Exxon Mobil <XOM.N> were a top drag on the Dow,
sliding more than 13 percent to $58.82 on the NYSE, as shares
of Chevron <CVX.N> plummeted more than 11 percent to $56.88.
The S&P energy index <.GSPE> was down 12.5 percent, while
the financial index <.GSPF> declined 3.2 percent.
A pullback in the cost for banks to borrow overnight
dollars from, or among, each other tempered some market
anxiety but the cost to borrow dollars over three months shot
higher again, indicating credit markets effectively remain
jammed.
In Asia Japan's Nikkei <> tumbled 9.6 percent, while
in Europe major indexes traded down more than 7 percent.
On the bright side, shares of General Motors Corp <GM.N>
climbed almost 5 percent to $4.99 after the company said
bankruptcy was not an option that the car maker was
considering as it grapples with "unprecedented challenges
related to uncertainty in the financial market."
In Asia Japan's Nikkei <> tumbled 9.6 percent, while
in Europe, major indexes slid more more than 7 percent.
U.S. front-month <CLc1> plunged over 8 percent to as low
as $78.61, a fresh 12-month low, on the New York Mercantile
Exchange. At midday, NYMEX front-month crude was down $7.03 at
$79.57 a barrel.
(Additional reporting by Leah Schnurr, Editing by Jan
Paschal)
