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Trading was once again marked by sharp moves on heavy volume. For a fifth straight day, the Dow industrials fluctuated in a range of more than 400 points.

"What you're seeing is a very short-term, direction-oriented market," said Eric Kuby, chief investment officer of North Star Investment Management Corp in Chicago.

Worries about the strength of French lenders, including Societe Generale, triggered a selloff in European and U.S. banks. Rumors about SocGen's financial health, which the bank denied, sent its shares tumbling 14.7 percent.

An index of European banks dropped 6.7 percent and the KBW index of U.S. bank stocks slid 4.9 percent as fear grew of a possible contagion of any French crisis. Bank of America Corp lost 10.9 percent to $6.77 and Goldman Sachs slid more than 10 percent to $110.34.

The Dow Jones industrial average lost 519.83 points, or 4.62 percent, to 10,719.94. The S&P 500 fell 51.77 points, or 4.42 percent, to 1,120.76. The Nasdaq Composite dropped 101.47 points, or 4.09 percent, to 2,381.05.

Wednesday's drop came a day after stocks rallied on the Federal Reserve's pledge to keep interest rates near zero for at least two more years.

Even after Tuesday's snap-back rally, the S&P 500 is down almost 18 percent from its 2011 closing high set April 29.

The losses came against the backdrop of recent weak U.S. economic data, the United States losing its triple-A credit rating from Standard & Poor's and the inability of lawmakers to address worries that another recession may be on the way.

About 15.1 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, almost double the year's estimated daily average of 7.8 billion.

Volume once again spiked in the last hour of trading, and the market closed near its session lows. Of late, overleveraged investors with losses on their books have been forced to sell shares near the end of the day.

"Between 3 and 3:20 (p.m.) you have people getting margin calls, and on days like today there's some nervousness about what those calls will look like," said Andrew Frankel, co-president of Stuart Frankel & Co in New York, referring to the volatility of the final hour of trading.

Slides in the value of stocks may increase the cash needed in margin accounts, which can spark further selling.

Dow component Walt Disney Co dropped 9.1 percent to $31.54 a day after the entertainment company's quarterly results failed to reassure investors that it could do well in a weak U.S. economy.

After the closing bell, Cisco Systems Inc's shares jumped nearly 12 percent after its quarterly results edged past Wall Street's scaled-back expectations.

Declining stocks outnumbered advancing ones during the regular session on the NYSE by a ratio of more than 8 to 3, while on the Nasdaq, almost five stocks fell for every one that rose.

(Reporting by Rodrigo Campos; Additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)

The comments were the clearest sign yet that Murdoch's son James may be sidelined after a phone hacking scandal swept its UK newspaper unit, which reports to him.

Murdoch made the comments on a conference call on Wednesday to discuss News Corp's fourth-quarter financial results. He said he and Chief Operating Officer Carey have "full confidence" in James Murdoch.

Media experts and analysts have wondered for several years who would replace Murdoch once he stepped down. Speculation has centered on his children as well as executives outside the family.

Murdoch also said the media company's board wants him to remain CEO after the hacking scandal raised questions about his leadership.

The big question on the minds of many people is whether Murdoch would continue to supervise News Corp after fresh revelations of the hacking charges, which have resulted in several high-profile departures from the company and the arrests of 12 ex-staffers.

Murdoch told investors on a conference call that the board gave him its backing.

"The board and I believe I should continue in my current role as chairman and CEO, but make no mistake, Chase Carey and I run this company as a team, and the strength of that partnership is reflected in our improved results," Murdoch said. "I'm personally determined to put things right when it comes to the News of the World."

Murdoch also said that he was disappointed that the company had to drop its bid for full control of UK satellite TV company BSkyB after the phone hacking scandal eroded News Corp's chances of getting approval for the deal.

News Corp's profit rose, at least by one measure. The company, which owns broadcaster Fox and newspapers including the Wall Street Journal reported a profit from continuing operations of $982 million, up from $902 million a year ago.

Its net income fell to $683 million, or 26 cents a share, down from $875 million, or 33 cents a share, a year ago.

Revenue rose 11 percent to $8.96 billion, helped by advertising sales and fees at Fox TV and its cable networks.

Operating income at its cable network unit rose 12 percent, helped by a 23 percent rise in advertising revenue at its domestic channels and a 30 percent rise in affiliate fees at its international cable channels. Advertising at its Fox broadcast business also rose by 7 percent.

Movie profits rose 53 percent thanks to animation hit "Rio" and home entertainment sales of "Black Swan" and "The Chronicles of Narnia."

"They were pretty good numbers," said Collins Stewart analyst Thomas Eagan.

Murdoch said the company would consider expanding its share buyback if the stock continues to be undervalued.

(Reporting by Yinka Adegoke. Editing by Robert MacMillan)

The poll reflected growing anxiety about the U.S. economy and frustration with Washington after a narrowly averted government default last week, a credit rating downgrade by Standard and Poor's, a stock market dive and a stubbornly high 9.1 percent jobless rate.

U.S. President Barack Obama came out bruised but relatively intact from the brutal, weeks-long debt debate. His approval rating dropped to 45 percent from 49 percent from a month ago, according to the poll conducted from Thursday to Monday.

But negative views on the economy are worrisome signs as he looks ahead to his 2012 re-election bid.

The poll found 73 percent of Americans believe the United States is "off on the wrong track," and just one in five, 21 percent, think the country is headed in the right direction.

This is the highest figure measured so far since Reuters/Ipsos began polling American public opinion in February

2009.

And perhaps even worse, the survey of 1,055 adults found that 47 percent believe "the worst is yet to come" in the U.S. economy, an increase of 13 points from a year ago when this question was last raised.

This is the highest measure since March 2009, when concern peaked at 57 percent, at the height of the recession. Ipsos pollster Julia Clark said it reflected "a general sense of unease."

"A difficult economic situation will create a difficult situation for the president when it comes to re-election a year from now," she said. "When the economy is bad, people look for a change."

NEGATIVE VIEW OF TEA PARTY, REPUBLICANS

Republicans appear to be suffering the most from the last-minute debt deal last week that was reached only after anguished negotiations between Obama and congressional leaders.

The survey found 49 percent of Americans held a negative view of Republicans after the deal was reached and 42 percent held a negative opinion of the conservative Tea Party movement. Tea Party conservatives stuck closely to their demand that deficit reduction be handled solely through spending cuts and were willing to risk a default to achieve their aims.

By contrast, 40 percent of those polled saw Democrats in a negative light.

"Coming out of this, the Republicans are I think taking the balance of the blame for the debt deal negotiations," Clark said.

Obama was viewed negatively by 42 percent as a result of the debt deal, while House of Representatives Speaker John Boehner, the top U.S. Republican, was viewed negatively by 37 percent.

The debt agreement that consumed weeks of debate and resulted in a two-staged arrangement to cut spending is not getting rave reviews.

More people surveyed, 53 percent, held a negative view of the compromise agreement, compared to 38 percent who think it is a good deal.

Democrats were more balanced in their views, with 47 percent approving it and 45 percent disliking it, while a majority of independents, 53 percent, and Republicans, 63 percent, did not like it.

"The process was very damaging to Washington," said Clark.

Americans held mixed views on the best way to stimulate economic growth. Cutting spending, 49 percent, and taxing the wealthy, 46 percent, came highest, followed by investment in infrastructure, 34 percent.

Democrats are urging Obama to shift away from the debate over how to reduce America's structural deficits and concentrate solely on creating U.S. jobs. Obama has signaled he plans to do this.

"Shift the focus on job creation," former New Mexico Governor Bill Richardson told MSNBC.

The Reuters/Ipsos poll of 1,055 adults, including 885 registered voters, had a margin of error of 3 percentage points for all respondents and 3.1 points for registered voters.

(Editing by Jackie Frank)

S&P, which was accused by the Obama administration of making an error in its calculations leading to Friday's downgrade, raised concern about the proposed new corrections policy and other issues in an 84-page letter to the Securities and Exchange Commission, dated August 8.

The SEC is weighing sweeping new rules designed to improve the quality of ratings after their poor performance in the financial crisis.

The 517-page proposal includes a requirement that ratings agencies post on their websites when a "significant error" is identified in their methodology for a credit rating action.

The letter was sent three days after the Treasury Department accused S&P of miscalculating -- by some $2 trillion -- the U.S. debt in the next 10 years. That calculation was in a draft press release announcing a downgrade in the government's credit rating from AAA to AA-plus.

S&P vehemently denied it had made an error, but acknowledged that it changed its long-term economic assumptions after discussions with the Treasury Department. It switched to another economic scenario that resulted in a debt load $2 trillion smaller by 2021. But it said that did not affect its decision to downgrade the U.S. debt.

S&P's criticism of the "significant error" proposal is part of a broader concern that the SEC's reforms prompted by the Dodd-Frank financial oversight law could give the U.S. government undue influence over its ratings decisions.

S&P in particular is facing a tense relationship with Washington. Its downgrade sparked a backlash from Administration officials and lawmakers from both sides of the aisle. A Senate Banking Committee aide on Monday said the panel has begun looking into S&P's decision to downgrade the U.S. credit rating.

WHAT'S AN ERROR?

The SEC's proposal, issued in May, contains a wide range of provisions, including requiring credit raters to disclose more about their internal controls, to protect against conflicts of interest, and to reveal more about their rating methods.

But one issue that really rubbed Standard & Poor's the wrong way was the proposed requirement that raters disclose when a "significant error" is identified in a procedure or methodology -- and especially, who should define what that is.

The SEC's proposal asks questions about whether the SEC should define the term "significant error."

"If the commission were to define the term significant error ... we believe it would effectively be substituting its judgment" for the credit-rating agency's, S&P President Deven Sharma said in the letter.

He said S&P's own error correction policy "has proven to be effective and, where errors have occurred, our practice of reacting swiftly and transparently has benefited the market."

Barbara Roper, director of investor protection for the Consumer Federation of America, said that policy has proven inadequate.

"What was their correction policy on their Enron rating? What was their correction policy on their Lehman rating? What was their correction policy on their Bear Stearns rating? They don't have an error correction policy -- they have an error denial policy, and the SEC is absolutely right to step in," Roper said.

McGraw Hill's Standard & Poor identifies numerous issues with the SEC's proposal, including concerns about competition and that rules are consistent globally.

Of the big three raters -- S&P, Moody's Corp and Fimalac SA's Fitch Ratings -- S&P was the only one to raise major concerns in its letter to the SEC about the "significant error" provision.

The measure was tucked into Dodd-Frank after the rating firms gave glowing ratings to toxic subprime mortgage-backed securities and then were slow to downgrade them.

A Senate investigations panel issued a report earlier this year faulting S&P and Moody's for triggering the financial crisis with their flawed ratings and subsequent decision to downgrade them en masse.

The big three ratings agencies have spent well over $1 million lobbying Congress and federal agencies since January as they press for changes to the regulations, according to data from OpenSecrets.org.

Roper said S&P's pushback to the "significant error" proposal underscores the need for tougher reforms.

"If anything, their letter suggests it is absolutely essential that the SEC define it because absent a definition, these guys will obfuscate," she said.

(Reporting by Sarah N. Lynch, with additional reporting by Andrea Shalal-Esa; Editing by Karey Wutkowski, Gary Hill)

Tokyo's Nikkei average gained 1.1 percent, but European stocks were mixed in early trade, struggling to extend the previous session's rebound from a 20-percent dive over 2-1/2 weeks, with renewed pressure on Italy and Spain dragging down shares from the two debt-stricken countries.

U.S. Treasuries pushed higher on Wednesday and benchmark yields dipped back near record lows hit the previous day after the Federal Reserve's pledge to keep rates near zero for at least another two years prompted more investors to pile in.

Gold held steady, hovering near a lifetime high around $1,778 an ounce struck in the previous session, but further gains could be capped by a rebound in equities after the U.S. Federal Reserve's vow to keep rates near zero.

HSBC is selling its $30 billion U.S. credit card arm to Capital One Financial Corp for a premium of $2.6 billion, as Europe's top bank streamlines its mammoth operations by getting rid of unwanted businesses.

The world's biggest food group Nestle raised its full-year outlook after strong demand for its Maggi and Nescafe brands in emerging markets helped it post a forecast-beating 7.5 percent rise in underlying first-half sales.

U.S. stocks initially zigzagged on Tuesday after the Fed promised to hold interest rates low for at least two years, before strongly rallying in late trading, led by a rebound in financial shares. But the statement also sparked economy fears driving oil lower on Tuesday, while Treasuries rebounded.

The Dow Jones industrial average gained 429.92 points, or 3.98 percent, to end at 11,239.77. The Standard & Poor's 500 Index rose 53.07 points, or 4.74 percent, to 1,172.53. The Nasdaq Composite Index added 124.83 points, or 5.29 percent, to 2,482.52.

A Reuters poll showed on Tuesday that Wall Street economists see odds of around one-in-three the United States will slip back into recession, heightening expectations the Fed will launch another round of unconventional credit easing.

On the earnings front, investors awaited results from companies including Cisco Systems, News Corp, Computer Sciences and Macy's.

(Reporting by Blaise Robinson)