Wall Street was disheartened by more signs of economic stress — including dismal reports from major retailers, a bleak outlook for the nation's auto industry and additional job cuts in the already beaten-down financial sector.

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NEW YORK — A disheartened Wall Street fell for the third straight session today as investors absorbed another series of dismal corporate reports and news that the government won’t buy banks’ soured mortgage assets after all.

The Dow Jones industrial average closed down 411.30, or 4.7 percent, at 8,282.66.

The broader Standard & Poor’s 500 index dropped 46.65, or 5.2 percent, to 852.30, and the Nasdaq composite index stumbled 81.69, or 5.2 percent, to 1,499.21.

The market started the day falling on more signs that companies are being hurt by a severe pullback in consumer spending. Macy’s said it lost $44 million in the third quarter as sales at the department store retailer fell more than 7 percent. And consumer electronics retailer Best Buy slashed its fiscal 2009 guidance on fears that consumer spending will erode even further.

Meanwhile, Morgan Stanley, suffering from the ongoing losses on Wall Street, outlined plans to cut 10 percent of the staff in its institutional securities group — its biggest business that covers everything from investment banking to stock trading

The bleak reports, which followed disappointing news from coffee retailer Starbucks and homebuilder Toll Brothers earlier in the week, made it increasingly clear to investors that companies across the economy are suffering from the aftermath of the housing and credit crises.

“There just doesn’t appear to be an end in sight to the bad news,” said Anton Schutz, portfolio manager of the Burnham Financial Industries Fund and the Burnham Financial Services Fund. “The selling is relentless.”

There was more pain at midmorning, when Treasury Secretary Henry Paulson said the government’s $700 billion financial rescue package won’t purchase troubled assets from banks after all. He said that plan would have taken too much time, and that the Treasury instead will rely on buying stakes in banks and encouraging them to resume more normal lending.

While the market had been pleased by the government’s decision weeks ago to buy banks’ stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation’s financial crisis. His comments, which underscored the anxiety that remains about the health of the financial system, sent stocks falling further.

Analysts believe the market is in the process of retesting the intraday low hit on Oct. 10, when the blue chips fell to 7,882.50.

“We’re just going through the typical process of testing and retesting,” said Matt King, chief investment officer of Bell Investment Advisors. “If we can continue to build higher and higher lows, that’s definitely a positive. If the Dow can build a base above 8,100 and bounce off that, we see that as a definite technical positive.”

The selling accelerated in the last hour of the day, as it has done in most sessions over the past two months.

Though Paulson’s announcement marks a major shift in the original bailout plan and rattled investors, Wall Street analysts generally believe the Treasury is now on the right path.

“That’s really what they should have done originally,” said King. “First and foremost, we have to make sure banks are going to survive, and then we can worry about lending. This is the quickest and most efficient way to do that.”

“Buying bad assets doesn’t do that,” he said.

However, there is some concern that the bailout funds are being depleted rather quickly, said Jason O’Donnell, senior research analyst at Boenning & Scattergood.

“Investors are generally in favor of the emphasis on the capital purchase provisions,” O’Donnell said. But, “we’re down quickly to a small portion of total funds remaining for other purposes.”

Paulson also announced a new goal for the program to support financial markets that supply consumer credit in such areas as credit card debt, auto loans and student loans. He said, “with a stronger capital base, our banks will be more confident” to support economic activity.

But investors are worried that a severe pullback in consumer spending — which drives more than two-thirds of the U.S. economy — will prolong a global economic downturn.

Oil fell nearly 6 percent, or $3.50, to settle at $56.16 a barrel on the New York Mercantile Exchange, the lowest closing price since January 2007. Oil prices have plunged more than 60 percent in four months from record highs near $150 in July.

Overseas, Japan’s Nikkei closed down 1.3 percent and the Hong Kong Hang Seng fell 0.7 percent. In European trading, London’s FTSE 100 fell 1.5 percent, Germany’s DAX fell 2.9 percent, and France’s CAC-40 dropped 3.1 percent.