The OMXS-index finished the day down 3.79 percent to 293.53, and the smaller OMXS30 was down 4.07 percent to 886.56.
With Monday’s close, the OMXS has dropped more 16.5 percent since the start of 2008.
The day started off on a sour note for both indices.
By 9.15 Monday morning, the OMXS had fallen 2.6 percent while the OMXS30 was off 2.8 percent.
The Stockholm exchange’s dramatic fall continued throughout the day. Just before 1.30 in the afternoon, the OMXS was down 3.5 percent to 294.3.
Bank stocks have been the hardest hit, with the financial stock index down 4 percent during trading on Monday. By mid-afternoon, SEB was down 7 percent, Swedbank was off 5.5 percent, and Handelsbanken and Nordea had each lost about 3 percent.
Other European exchanges were down between 3 and 4 percent.
Earlier in the morning news came in confirming the purchase of crisis-hit Bear Stearns by rival JP Morgan, with support from the American central bank, which at the same time lowered interest rates on short term loans to banks.
The Federal Reserve had hoped the deal for Bear Stearns, Americas’ fifth-largest investment bank, would save the firm from bankruptcy, thus averting a major credit market crisis.