NEW YORK » Wall Street has again succumbed to a disheartening reality - the recession is taking a heavy toll on U.S. companies.

The major indexes, which plunged and then soared the first two trading days of the week, ratcheted up and down during the course of the session; the Dow Jones industrial average fell as much 271 points, came close to breaking even and then slumped before closing down 105.

Microsoft Corp. set the tone for the day and made clear more pain was to come before an elusive economic recovery would emerge. The software giant posted an 11 percent drop in profit and said it will slash 5,000 jobs over the next 18 months.

Bank of America Corp. said former Merrill Lynch & Co. Chief Executive John Thain resigned. The company didn't offer a reason for Thain's departure, but it follows news that Merrill Lynch had moved up its year-end bonuses, handing out payments just days before it was officially acquired by Bank of America on Jan. 1.

More downbeat economic readings, including an increase in the number of weekly jobless benefit claims and a sharp drop in home construction activity, added to the day's gloom.

The Dow fell 105.30, or 1.28 percent, to 8,122.80.

Broader market indexes recovered some of their losses but still showed big drops. The Standard & Poor's 500 index fell 12.74, or 1.52 percent, to 827.50.

The technology-heavy Nasdaq composite index dropped 41.58, or 2.76 percent, to 1,465.49 after the Microsoft news.

The Russell 2000 index of smaller companies fell 13.91, or 3.05 percent, to 442.85.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange where consolidated volume came to 5.75 billion shares compared with 6.33 billion shares traded Wednesday.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.60 percent from 2.55 percent late Wednesday.

The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.09 from 0.10 percent late Wednesday.

The dollar rose against other major currencies, while gold prices rose.

Light, sweet crude rose 12 cents to settle at $43.67 a barrel on the New York Mercantile Exchange.