Jarred by new jobless alarms, Congress raced to approve legislation yesterday to keep unemployment checks flowing through the December holidays and into the new year for a million or more laid-off Americans whose benefits are running out.

The economic picture was only getting worse, if Wall Street was any indication. The Dow Jones industrials dropped more than 400 points for a second straight day, reaching the lowest level in more than five years, and the Standard & Poor's 500 index fell below lows established six years ago.

The Dow fell 445 points, or 5.6 percent, to its lowest close since March 2003. The decline brings the Dow's two-day drop to 873 points, or 10.6 percent, its worst two-day percentage loss since October 1987.

Financial stocks plunged on worries that the government's financial rescue won't be sufficient to cover banks' losses. Meanwhile, a sharp drop in oil prices weighed heavily on energy companies.

Yesterday's pullback came amid heavy volume, a welcome sign for some investors who are looking for the market to experience a cathartic sell-off that could lay the groundwork for a recovery. Heavier volume can signal investors are scared enough to sell rather than simply sit on the sidelines, which can result in relatively light volume.

Observers said the selling highlighted the entrenched pessimism about the prospects for the economy.

"Unrelenting gloom has taken over the markets," said Dana Johnson, chief economist at Comerica Inc. "The economic news, the concerns about some major financial institutions, the concerns about the auto sector, earnings reports, everything is coming out in a way that is just provoking a massive selling in the stock market."

The Senate's vote followed yesterday's government report that laid-off workers' new claims for jobless aid had reached a 16-year high and the number of Americans searching for work had surged past 10 million.

The White House, which had opposed broader legislation containing the benefits extension, urged passage of the new version and said President Bush would quickly sign it.

As Congress prepared to leave town — perhaps for the year — there was no such resolution on helping the auto industry, a disaster in the making that could lead to hundreds of thousands if not millions of additional lost jobs. Democratic leaders said they could return to Washington in mid-December to vote on rescue loans if the carmakers first present a plan on transforming and modernizing their operations.

As for the jobless benefits, about 1.2 million people would exhaust their unemployment insurance by the end of the year without the extension, sponsors said. The measure is estimated to cost about $5.7 billion, although economists put the positive impact at $1.64 for every dollar spent on jobless benefits because the money helps sustain other jobs and boosts consumer confidence.

"Putting money in the hands of unemployed families means they will be able to pay their rent and utility bills, buy groceries and clothe their children," Sen. Dick Durbin, D-Ill., said after the voice vote in the Senate. "It is money that will create economic growth in America."

The House had approved the bill in October.

More than 1.2 million jobs have been lost so far this year, and the civilian jobless rate is at a 14-year high of 6.5 percent.

Yesterday's Labor Department report said claims for unemployment benefits jumped last week to 542,000 the highest level since July 1992 and fresh evidence of a rapidly weakening job market that is expected to get even worse next year.