NEW YORK (NBC) - Any way you cut it, it was a terrible day for the stock markets.

Worries about the state of the economy in the U.S. and around the world slammed stocks on Thursday, driving the Dow Jones industrial average to close down more than 500 points. It was the Dow's worst drop since October 2008.

All three major indexes — the Dow, the S&P 500 and the Nasdaq — ended down more than 4 percent. They also are down more than 10 percent from their previous highs, putting them into correction territory.

The market's so-called "fear index," the CBOE Volatility Index (VIX), rose above 30 in its biggest daily percentage move since May 2010.

In terms of lost treasure, investors lost (on paper) about $800 billion, as measured by the Wilshire 5000 Total Market Index. The Wilshire has lost about $1.9 trillion in the last nine days.

"People are throwing in the towel because they can't find relief on any front. There are a lot of worries about the economy," said Milton Ezrati, market strategist at Lord Abbett Co. in Jersey City, New Jersey, which manages $110 billion in assets.

Analysts predicted further losses ahead, given the strong degree of pessimism in the market.

Investors are now nervously focused on the crucial monthly jobs data to be released Friday by the Labor Department. Expectations are not high.

Nonfarm payrolls likely increased 85,000 last month, according to a Reuters survey, after rising only 18,000 in June. The unemployment rate is expected to hold steady at 9.2 percent.

Earlier, the Labor Department reported that weekly initial jobless claims totaled 400,000, less than the 405,000 that was forecast. Investors were disappointed they didn't see more improvement in the labor market gauge.

Officials moved to calm markets and ease volatility around the world, with the largest move coming from Tokyo, where the government spent an estimated 1 trillion yen ($13 billion) to stem the strength of its currency.

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"They're trying to fight a futile battle," said Ankita Dudani, currency strategist at RBS. "It won't have a lasting impact so long as the euro-zone crisis continues and the global (economic) outlook deteriorates."

European stocks tumbled to a level not seen since after the financial crisis in mid-2009, with Italy's equity market firmly in bear market territory, down nearly 30 percent since February, as investors fretted the euro-zone debt crisis was spreading.

Italy's blue-chip FTSE MIB index was suspended about 30 minutes before the close. The index tumbled slightly more than 5 percent. The FTSE 100 in London closed down 3.4 percent.