NEW YORK, Oct 22, 2008 (AFP) - US stocks dived Wednesday on growing global recession fears, grim company outlooks and falling oil prices, with the broad-market Standard & Poor's 500 index finishing at a five-year low.

Panic-selling gripped the market after crude oil prices dropped more than five dollars a barrel in New York and London amid worries about falling demand in a faltering global economy and a strengthening dollar.

The Dow Jones Industrial Average plummeted 514.45 points (5.69 percent) to close at 8,519.21, and the tech-heavy Nasdaq composite slid 80.93 points (4.77 percent) to 1,615.75.

The broad Standard & Poor's 500 index fell 58.27 points (6.10 percent) to 896.78, its lowest closing level since April 2003.

US stocks spent the second straight day deep in the red, joining a global stock market rout on signs that the financial crisis is battering economies, despite recent government efforts to unblock frozen credit.

The White House announced it would host a summit of the leaders of the Group of 20 rich and emerging nations on November 15 to try to coordinate efforts to counter the worst financial crisis in seven decades.

"Despite strong earnings from some Dow members, fears of a global recession ruled the day, pushing the venerable index further and further into the red," said Mark Fightmaster, an analyst at Schaeffer's Investment Research.

With no major economic news to focus on, investors grew increasingly more worried about corporate earnings reports, analysts said.

"The earnings news hitting the tape over the last two days is more pessimistic than that received from companies reporting earlier this month," said Fred Dickson, chief market strategist at DA Davidson & Co.

Dickson said that although much of the bad news was already embedded in stock prices, investors were selling off companies that had lowered guidance below analysts' estimates.

"It appears that investors are rethinking their assumptions about the depth and duration of the recession, recognizing that the credit crisis has taken an annoying economic slowdown into something far more serious," he said.

In another move to get cash flowing again through the squeezed financial system, the Federal Reserve said it would raise the interest rate it pays on reserves deposited with it by banks, effective Thursday.

On Tuesday, the Fed announced that it was offering up to 540 billion dollars of help to money market mutual funds. The central bank has pumped hundreds of billions of dollars into the fragile banking system to keep it afloat.

"Right now, US currency and Treasuries continue to be the asset of choice for huge numbers of global investors seeking both financial and political safety," said Dickson.

Despite governments' emergency actions, investors remained nervous.

"Word that a number of companies are passing on stock buybacks in a bid to preserve cash has only added to the worries about the length and complexion of the economic slowdown," Briefing.com's O'Hare said.

"Accordingly, there is a stronger bias to sell than to buy at this juncture as festering concerns about near-term stock price deflation continue to outshine the favorable, long-term risk-reward proposition," he added.

Falling oil prices hammered the energy sector. ExxonMobil, the Dow's biggest component, plunged 9.69 percent to 64.57 dollars and ConocoPhillips dropped 9.08 percent to 49.06.

Boeing plunged 7.83 percent to 12.48 dollars after the aerospace giant reported a sharp drop in quarterly profit, citing a prolonged labor strike and supply problems.

Merck fell 6.54 percent to 28.01. The pharmaceutical firm reported a 28 percent profit fall and announced it would cut 7,200 jobs by 2011.

Fast-food kingpin McDonald's dropped 1.72 percent to 54.18 despite posting stronger-than-expected profit.

Bucking the rout, computer maker Apple soared 5.88 percent to 96.87 after posting a 37.5 surge in quarterly net profit that topped market forecasts, boosted by better-than-expected sales of iPhones.

SanDisk plunged 31.64 percent to 10.09. South Korea's Samsung Electronics on Wednesday withdrew its 5.8-billion-dollar offer to buy the US flash-memory giant, saying it no longer believes the firm is worth the money.

Bonds advanced. The yield on the 10-year US Treasury bond fell to 3.618 percent from 3.703 percent Tuesday, and that on the 30-year bond dropped to 4.088 percent from 4.194 percent. Bond yields and prices move in opposite directions.