``Everyone's watching the Libor, looking for credit market to thaw and it's not there yet,'' said Alec Young, a New York- based equity strategist at Standard & Poor's. ``Until you get some convincing thawing in the credit markets, the threat of a global recession and a global profits recession remains and it's going to be difficult for stocks to build momentum.''

U.S. stocks fell yesterday after Treasury Secretary Henry Paulson said more banks may collapse and unprecedented global interest-rate cuts failed to convince investors the economy will avoid a recession. Paulson signaled the government may invest in banks as the next step in trying to resolve the deepening credit crisis.

Second-Worst Slump

The S&P 500's year-to-date slump of 32.9 percent through yesterday is the worst since 1974 and the second-biggest drop ever compared with previous returns through Oct. 8, according to Harrison, New York-based research firm Bespoke Investment Group LLC.

The 37 percent decline from its record a year ago today has left the measure valued at less than 19 times the reported earnings of its companies at the start of trading today, the cheapest since February. Europe's Dow Jones Stoxx 600 Index trades at 9.59 times profit, while the MSCI World is valued at 12.07 times the reported earnings of companies in the index, according to Bloomberg data.

Analysts expect a 5.6 percent drop in third-quarter profit at S&P 500 companies, according to Bloomberg data. Alcoa Inc., the biggest U.S. aluminum producer, kicked off the earnings season with lower-than-estimated profit, saying net income slid by more than half.

Shorts Return

The end of a three-week ban on short selling financial stocks may reduce the market's record price swings as hedge funds increase trading.

Since the Securities and Exchange Commission started the rule Sept. 19, volume on the New York Stock Exchange dropped 35 percent and the Chicago Board Options Exchange Volatility Index surged to 57.53, its third straight record. Options on the VIX, as the volatility gauge is known, imply it will fall 44 percent in the next two weeks after the rule expired last night.

Financial companies led the S&P 500's retreat from its record a year ago today, losing 57 percent as a group as Lehman Brothers Holdings Inc. filed for bankruptcy, American International Group Inc. was seized by the government and Bear Stearns Cos. and Merrill Lynch & Co. were forced into emergency takeovers.

Telephone companies had the second-steepest decline among 10 groups in the S&P 500, losing 44 percent over the past year. Indexes of each of the other eight groups plunged at least 25 percent, except for companies that sell consumer staples, which lost only 10 percent.

Four companies in the benchmark index for U.S. equities tumbled more than 90 percent over the past year: AIG, National City Corp., General Growth Properties Inc. and Wachovia Corp.

The three biggest gains in the bear market came from tobacco, beer and hospital companies: UST Inc., Tenet Healthcare Corp. and Anheuser-Busch Cos. each climbed more than 22 percent over the past year.