Updated at 4:40 p.m. ET

The market sell-off was in full force Thursday as investors found themselves unable to shake off fears about the economy and the possibility of another recession.

The Dow Jones Industrials ($INDU) plunged more than 500 points at the close, with the Nasdaq ($COMPX) falling 5% and the Standard & Poor's 500 Index ($INX) also diving nearly 5%.

The day, coming after a difficult two-week span, again raised more questions about the long-term future of the stock market. And one question was foremost on everyone's mind: How low can we go?

August is traditionally a blah month for stocks, and there was an expectation that we'd head into the doldrums. But a plunge like this certainly disfigures the big picture, and on Thursday market observers were revising their forecasts for how low this thing could go.

Support for the S&P 500 fell through some key technical levels, with the index closing the session at 1,200.

Everything Friday will hinge on the July nonfarm payroll report, due out before the market opens. Analysts are expecting to see 85,000 net positions filled and an unemployment rate stuck at 9.2%. Any variation from that in either direction should elicit a dramatic response from the market. And if that payroll number happens to be negative? Well, that's when sobbing in a fetal position seems like a good idea.

Sounds like Wall Street is expecting bad news, and certainly some of those worries factored into Thursday's sell-off. July likely wasn't a great month for hiring, particularly with the high-profile Congressional angst surrounding the debt ceiling.

"There's a change in tone out there," RBS economist Michelle Girard told CNBC. "I'm more concerned about the outlook now than I was at any point since we emerged from recession. It's not near where I think we're going to double dip, but I would say to people that I'm watchful for that."

Investors are discounting a new recession next year, writes David Callaway of MarketWatch. But then you have other pundits who think these lows have made the market oversold.

"For investors, it's important to remember that the stock market is a leading indicator, which means the last two weeks of pain was not so much tied to the U.S. debt talks as to discounting of some future economic calamity, likely a recession," Callaway adds. On the flip side, that also means the market will start rebounding before the economy does.