The White House and Congress are talking about a stimulus package, and a half-point cut in interest rates is a lock, but investors can't wait. They fear the economy is quickly sliding into a recession, and they sold shares furiously.

The Dow Jones industrial average fell 306.95 points, or 2.5 percent, to 12,159.21, its biggest decline in two months. The Standard & Poor's 500 stock index fell 2.9 percent, to 1,333.26. It is now down 9.2 percent for the year. The S&P 500 is now on track to experience the worst January ever, surpassing 1970's 7.65 percent slump. (The worst month ever was September 1931, when the index fell 29.94 percent.)

The Nasdaq fell 2 percent today, and the Russell 2000 fell 2.8 percent.

"The market clearly right now is fearing, and trading on the assumption, that there is a significant slowdown going on in the economy and probably a recession on the horizon,'' Dean Gulis at Loomis Sayles & Co. told Bloomberg News. "That's what's driving stocks.''

Investors had plenty of evidence that their fears had foundation.

The Federal Reserve Bank of Philadelphia said that manufacturing activity in the Mid-Atlantic states contracted sharply in January. Building starts on new homes fell to their lowest level since 1991. Merrill Lynch reported a loss that was wider than expected as it wrote down the value of investments tied to subprime mortgages and hedges on those investments by $14.1 billion. An index showing the shipping of bulk commodities like iron ore had its steepest decline ever. The credit rating agencies said they were reviewing the triple-A ratings of bond insurers MBIA and Ambac Financial Group.

Federal Reserve chairman Ben Bernanke told the House Budget Committee that even though the U.S. economy is facing difficulties, the Fed has not forecast a recession. He told a congressional committee that he supports efforts to craft a fiscal stimulus package and repeated that the Fed was ready to act aggressively to counter recession risks.

Too little, too late, the market seems to be saying.