It took a while for investors to react to the latest dismal economic data from the United States - but within 30 minutes of the start of trading the selling had begun. Major indexes were down sharply at midday on Wednesday after back-to-back reports raised deflation as a potential threat and suggested no end in sight for the deteriorating U.S. housing market.

The Dow Jones industrial average was down 172 points, or 2 per cent, to 8252. The broader S&P 500 was down 23 points, or 2.7 per cent, to 836. If it closes at this level, it will have hit a new five-and-a-half year low - and sending technical analysts scrambling to interpret the meaning of a failed "retest."

All 10 subindexes were down. Financials were walloped the hardest, tumbling 6.4 per cent. Consumer discretionary stocks fell 3.6 per cent, industrials fell 3.9 per cent and consumer staples fell 3 per cent.

In Canada, the S&P/TSX composite index was down 251 points, or 2.8 per cent, to 8585 - fewer than 50 points away from scoring a new low.

Financials fell 4.7 per cent, industrials fell 5.4 per cent, energy stocks fell 2.2 per cent and utilities fell 1.9 per cent. Materials were the only winners, rising 1.2 per cent thanks to gold producers.