Wall Street suffered another huge drop today amid growing fears that the government's financial rescue plan might not be enough to ward...

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NEW YORK — Wall Street suffered another huge drop today amid growing fears that the government’s financial rescue plan might not be enough to ward off a recession. Investors are also discouraged after news from the government of declining factory orders and a seven-year high in jobless claims.

The Dow Jones industrial average closed down 348.22, or 3.2 percent, at 10,482.85.

Microsoft, one of the 30 Dow stocks, slipped 23 cents to close at $26.25 a share. Boeing, also a Dow stock, fell $3.04, or 5.4 percent, to $53.58 — a 52-week low.

Broader stock indicators also fell sharply. The Standard & Poor’s 500 index fell 46.78, or 4 percent, to 1,114.28, and the Nasdaq composite index fell 92.68, or 4.5 percent, to 1,976.72.

The concern on the Street is that the $700 billion bailout plan, even if it wins final congressional approval in the House, won’t be enough to stimulate growth. Investors appeared to be pulling more money out of the market and settling in for a prolonged economic winter.

The government said the number of people seeking unemployment benefits rose last week and that demand at the nation’s factories has fallen by the largest amount in nearly two years. The market is interpreting the Commerce Department report on factories as a sign that tight credit conditions are hitting manufacturers.

“The economy is what’s driving this weakness,” said Subodh Kumar, global investment strategist at Toronto-based Subodh Kumar & Associates. “I think now what’s going on is a focus on the economic weakness in a whole bunch of areas.”

He also said “the next couple of days are going to be pretty intense politically” as Wall Street girds for another vote on the financial bailout plan.

The bill that passed the Senate late Wednesday will be sent to the House as soon as Friday. The latest version of the bill adds $100 billion in tax breaks for businesses and the middle class and raises the limit on federal deposit insurance to $250,000 from $100,000.

Supporters are hoping the sweetened bill will be more palatable to some of the 133 House Republicans who rejected the measure in a vote Monday that took Wall Street, and many on Capitol Hill, by surprise.

Those in favor of the plan to let the government buy billions of dollars in bad mortgage debt and other now-soured assets say it will help unclog the world’s ailing credit markets. Banks are fearful of making loans, even to each other, because of worries they won’t be repaid. That, in turn, is weighing on the economy, making borrowing more difficult and expensive for businesses and consumers alike.

The credit markets showed some increased strain today. The yield on the 3-month T-bill, the safest type of investment, fell to 0.70 percent from 0.79 percent late Wednesday. The historically low yields indicate investors are willing to accept the smallest of returns to safeguard their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.64 percent from 3.74 percent late Wednesday.

The stock market is a leading economic indicator of sorts, because investors tend to buy and sell based on where they believe the economy will be six months or more in the future. Today’s big decline points to a market increasingly resigned to further economic instability whether or not the bailout plan becomes law.

“There are a lot of people who think regardless of a bailout, there’s still this economic data and the horror stories out there,” said Todd Salamone, director of trading at Schaeffer’s Investment Research. “Certainly, there’s a negative psychology.”

Investors might get another grim reading about the economy on Friday when the Labor Department releases its September jobs report, one of the most closely watched indicators. The September nonfarm payrolls report from the Labor Department is expected to show a loss of 100,000 jobs, according to a median estimate from economists. That would be the ninth straight month that the economy has lost jobs.

Light, sweet crude fell $4.56 to settle at $93.97 a barrel on the New York Mercantile Exchange. Gold and other commodities also declined during the session.

Billionaire investor Warren Buffett said the U.S. has been hit with an “economic Pearl Harbor,” and the government must respond quickly. “That sounds melodramatic, but I’ve never used that phrase before. And this really is one,” Buffett said in an appearance on the “The Charlie Rose Show” on PBS stations.

The Labor Department reported today that initial claims for unemployment benefits rose by 1,000 last week to a seasonally adjusted 497,000, above expectations for a 475,000 increase. That’s the highest seen since the immediate aftermath of the Sept. 11, 2001, terrorist attacks, and unnerved investors worried not only about strains in the financial market but also the effect on the broader economy.

Beyond employment, the government reported that orders for manufactured goods fell by 4 percent in August from July. Economists had expected a 2.5 percent decline. It is the biggest drop since a 4.8 percent decline in October 2006.

The dollar was higher against other major currencies, particularly the euro, even after the European Central Bank left interest rates unchanged. Higher interest rates in Europe generally make the euro more attractive to investors than the dollar.

The European Central Bank left its key interest rate unchanged today amid concerns over inflation but explored the option of lowering the rate as the financial crisis increasingly affects the continent. The ECB is also considering a bailout of the region’s financial system, similar to what U.S. lawmakers are considering.

That left open the question that policymakers globally might be less focused on fighting inflation, and instead trying to come up with short-term solutions to stimulate the economy.

“At some point, you have to face the realities that we have some serious problems and there aren’t going to be any quick fixes,” said Ryan Larson, head of equity trading at Voyageur Asset Management. “Even if bailouts pass, the fact remains that it might get credit flowing again but won’t solve the broader issues out there.”