Stock markets jolted still lower in the United States and around the globe yesterday despite efforts to slow the selling stampede, and world industrial powers in Washington urgently debated new steps to prevent an economic catastrophe. And a plan for the government to invest in U.S. banks moved forward.

A sign of how bad things have gotten: A drop of more than 120 points in the Dow Jones industrials was greeted with sighs of relief after the index had fallen nearly 700 points earlier in the day.

Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke met with their counterparts from the world's six other richest countries as the rout of financial markets sped ahead in the face of dramatic rescue efforts.

Paulson himself said yesterday that the Bush administration would move ahead with a plan to buy stock in financial institutions. It would mark the first time the government has taken equity ownership in banks in this manner since a similar program was used during the Great Depression.

Officials from the Group of Seven countries issued a five-point plan last evening. The countries pledged to protect major banks and to prevent their failure, work to get credit flowing more freely again, support the efforts of banks to raise money from public and private sources, bolster deposit insurance, and revive the mortgage-financing market.

Stock prices plummeted in the United States, Europe and Asia, even as President Bush tried to reassure Americans and the world that governments were aggressively addressing what has become a near panic.

"We're in this together, and we'll come through this together," Bush declared at the White House as finance ministers and central bankers gathered nearby. "Anxiety can feed anxiety, and that can make it hard to see all that's being done to solve the problem."

A measure of the anxiety: An index considered to be Wall Street's fear gauge reached record highs yesterday. The Chicago Board Options Exchange Volatility Index, known as the VIX, rose to an all-time intraday high of 76.94. The VIX, which usually trades under 50, tracks options activity for the companies in the S&P 500.

The Dow fell 128.00, or 1.49 percent, to 8,451.49. The broader Standard & Poor's 500 index fell 10.70, or 1.18 percent, to 899.22. The Nasdaq composite index rose 4.39, or 0.27 percent, to 1,649.51. The Russell 2000 index of smaller companies rose 23.28, or 4.66 percent, to 522.48.

The news was worse overseas. Britain's FTSE index ended down 8.9 percent, below the 4,000 level for the first time in five years; Germany's DAX fell 7 percent; and France's CAC-40 finished down 7.7 percent. Japan's benchmark Nikkei 225 index fell 9.6 percent, also hitting a five-year low. For the week, the Nikkei lost nearly a quarter of its value. Russia's market never even opened.

In the U.S. markets, prospects of further government help and, perhaps, attractive prices helped parts of the financial sector. Big national banks were among the gainers, including Bank of America Corp., which rose $1.24, or 6.3 percent, to $20.87.

Not all financials enjoyed a bounce: Morgan Stanley Inc. fell $2.77, or 22 percent, to $9.68 as investors worried that even with a major investment from Japan's Mitsubishi UFJ Financial Group, the company was still facing troubles. Meanwhile, Goldman Sachs Group Inc. fell $12.55, or 12 percent, to $88.80.

Citigroup Inc. said late Thursday that it was suspending its bid to acquire Wachovia Corp., which will be bought by Wells Fargo & Co. Citi rose $1.18, or 9.1 percent, to $14.11, while Wells Fargo rose $1.06, or 3.9 percent, to $28.31. Wachovia surged $1.55, or 43 percent, to $5.15. Federal antitrust regulators yesterday approved the $11.7 billion acquisition.

Bush made it clear the United States must work with other countries to battle the worst global financial crisis in more than a half-century.

"We've seen that problems in the financial system are not isolated to the United States," he said. "So we're working closely with partners around the world to ensure that our actions are coordinated and effective."

The Dow dropped a little over 100 points while he was speaking.

Fear has tightened its grip on investors worldwide even as the United States and other countries have taken radical actions, including unprecedented, coordinated interest rate cuts by the Fed and other major central banks.

Besides the United States, the other members of the G7 meeting in Washington are Japan, Germany, Britain, France, Italy and Canada. Finance officials also planned to meet with Bush today.

An even larger group of nations - the G20 - will meet with Paulson this evening. Containing the spreading financial crisis also will dominate discussions at the weekend meetings of the 185-nation International Monetary Fund and the World Bank in Washington.

Dominique Strauss-Kahn, head of the IMF, which is the world's financial firefighter, urged countries to work together to come up with coordinated plans to make sure that squeezed banks and other financial institutions have access to both quick and longer-term sources of cash to help them weather the storm.

Text and video of President Bush's remarks yesterday on the economy are at http://go.philly.com/economy

Read more about the financial meltdown at http://go.philly.com/turmoil