[BRIEFING.COM] After going more than four years without a market correction of 10%, the Dow, S&P 500, and Nasdaq all endured large enough losses intraday to make such a scenario become a reality.

However, a huge short covering rally in the S&P 500's most heavily weighted sector -- Financials -- triggered a significant broad market advance in the final hour of trading.

At their lows, the Dow, S&P 500, and Nasdaq were down 2.7%, 2.6%, and 2.9%, respectively.  The sharp losses followed an alarming announcement from Countrywide Financial (CFC 20.18, -1.11) that it had tapped the entirety of its $11.5 billion credit line to deal with short-term funding issues. 

Stocks, however, garnered momentum late in the day and staged one of the biggest market turnarounds in recent memory.  All three major indices closed above their "corrective" lows. The S&P 500 eked out a small gain while the Dow and Nasdaq closed modestly lower.

Fears of a global liquidity crunch, which prompted carry-trade unwinds that sent the yen surging the most against the dollar since 1998, were among several issues plaguing stocks right out of the gate.

In fact, when the yen hit its best levels of the day around 1:00 ET, that was when the Dow slipped to its lows of the session (-343 points or -2.7%). At that point, the Dow joined both the S&P 500 and Nasdaq down more than 10% from their July peaks, signaling a market correction for an index containing even the bluest of blue chips.

The extensive sell-off in everything from gold to copper suggested that hedge funds were aggressively unwinding some of their biggest winners. Materials (-1.2%) was the day's worst performing sector, but it too closed well off its lows. It was down as much as 5.2%.

Renewed enthusiasm for the depressed Financial sector was the big story of the day, though. It was down 1.5% early on but closed up 3.5%.

Throw in a handful of encouraging developments throughout the afternoon and investors on the wrong side of the tape since credit concerns began to surface ran for cover.

Speculation of an emergency Fed meeting around 2:00 ET helped counter St. Louis Fed President Poole's comment earlier that only a "calamity" would justify a rate cut.

Bear Stearns (BSC 116.60 13.45) soared 13% amid reports suggesting it may get enough funding from a "deep pocket partner" to silence rumors concerning potentially more adverse results. Fannie Mae (FNM 65.31 +3.86) saying it is in constructive talks with regulators to lift portfolio caps also helped investors look past the Countrywide Financial news.

Separately, it was reported before the start of trading that housing starts plunged to 10-year lows.