It was a rough ride for North American investors Monday, with markets closing sharply lower but nowhere near the eye-popping lows they hit earlier in the day.

The S&P/TSX — down more than 1,000 points, or 11 per cent, earlier in the session — closed down 5.3 per cent, or 572.92 points, to 10,230.43.

The Dow Jones industrial average traded 3.6 per cent lower, closing down 369.88 points to 9,955.50 — after falling 7.7 per cent, or 800 points earlier. It closed below 10,000 points for the first time since April, 2005. The S&P 500 fell 3.8 per cent, or 42.34 points, to 1,056.89.

Investors raced to get out of stocks Monday, as the financial crisis rocking the United States showed signs of moving deeper into Europe and Asia and the price of oil plummeted.

"Everyone is finally coming to the realization that the U.S. is in recession, and passing a bailout law will not change that," said Louis Gagnon, a finance professor at Queen's University in Kingston, Ont. "The consumers must go back to spending, but they will not do this when they are losing their jobs and their houses."

"This is going to go on for several months. Period," said Mark McQueen, president of Wellington Financial in Toronto. "If you are currently investing on margin, exit and take your lumps because from here we can see the Dow at 8,000."

The S&P/TSX has fallen more than 30 per cent since hitting an all-time high in June, when it peaked at 15,154.77 on the strength of $147 (U.S.)-a-barrel oil.

The energy sector — which is weighted second behind financials on the S&P/TSX — fell 9.3 per cent as oil slipped below $90 a barrel for the first time since April. It settled at $87.81 a barrel Monday, down $6.07 on the New York Mercantile Exchange.

"The Canadian market is going to keep getting lower because of the effect of commodities," said Brandon Osten, president of Venator Capital Management Inc. in Toronto. "Get the hell out of commodities — it's not too late for you. Oil can go back to $65 a barrel. Any out there who think $90 oil is low by historical levels need to take another look."

No sector was untouched — health care was off about 7 per cent, industrials fell 6.35 per cent and materials fell 5.62 per cent. The telecom sector fared the best, losing 3.01 per cent.

UBS Securities Canada chief economist George Vasic wrote in a morning note that the Canadian economy will slip into a recession in the last quarter of 2008 and first quarter of 2009, as trade with the United States slows and commodity prices fall. He said both countries face a recession, but Canada is better positioned going in.

"Importantly, Canada's underpinnings are much stronger, which mitigates the economic risk considerably," he said. "Indeed, with Canada's fiscal position near balance, and substantially lower debt ratios, governments easily have the capacity to spend 2 to 3 per cent of GDP for stabilization purposes if they so chose."

The U.S. Congress last week passed legislation on a $700-billion bailout plan to get banks lending to each other again, after the subprime-mortgage crisis wreaked havoc on financial markets. The U.S. government was forced to take over mortgage lenders Freddie Mac and Fannie Mae in September to protect $5-trillion in mortgages, and also rescued insurer AIG Corp. with an $85-billion investment.

Lehman Brothers Holdings Inc. declared bankruptcy, Merrill Lynch & Co. Inc. was taken over, and Goldman Sachs and Morgan Stanley restructured into depository institutions.

The ripple effects extended deeper into Europe over the weekend, with Germany bailing out Hypo Real Estate AG, and France's BNP Paribas throwing a lifeline to financial group Fortis. The European Central Bank flooded markets with $50-billion Monday, while the Bank of England contributed another $10-billion.

"They bought the same mortgages that brought the problems to America," Mr. McQueen said. "A lot of these banks have been having trouble since the summer of 2007."

Losses on major indexes Monday included 4.5 per cent drops in China and Japan, and 7 per cent declines in London and Germany. It was the worst one-day drop ever for European shares, as the FTSEurofirst 300 index fell 7.8 per cent.

"There are worries rushing round the banking sector as markets try to account for the potential disparity that could be seen in savers' trust in deposit accounts and the knock on effect this will potentially have on the viability of institutions," said London-based CMC Markets dealer Jimmy Yates. "All told it's not looking pretty and it does seem as if we may now have to resign ourselves to seeing further casualties along the way."