U.S. Stocks Tumble, Sending S&P 500 to Bear Market; Banks Slide
By Eric Martin
slid, sending the Standard & Poor's 500 Index into its first bear market since 2002, after rising borrowing costs spurred concern the biggest mortgage finance companies may not weather the housing slump.
Fannie Mae and rival Freddie Mac led financial shares to their biggest tumble in six years after Fannie sold $3 billion in notes at record yields over benchmark rates. Cisco Systems Inc. dropped to the lowest level since September 2006 and Intel Corp. slipped to a six-month low on analyst predictions that a slowing economy may hurt sales. Bank of America Corp. and Citigroup Inc. fell as Credit Suisse AG said 40 percent of the 50 biggest U.S. lenders may need to cut dividends or raise more capital.
The S&P 500 lost 29.01 points, or 2.3 percent, to 1,244.69. The Dow Jones Industrial Average fell 236.77, or 2.1 percent, to 11,147.44. The Nasdaq Composite Index plunged 59.55, or 2.6 percent, to 2,234.89. Almost four stocks declined for each that rose on the New York Stock Exchange.
``The trouble with the financials is that so much of it is a black box,'' Nick Sargen, who helps oversee $30 billion as chief investment officer of Fort Washington Investment Advisors in Cincinnati, said in an interview with Bloomberg Television. ``Everybody thought the worst of the writedowns were passed in April. And behold, here we are now and that wasn't the case.''
The S&P 500 extended its retreat from an October record to more than the 20 percent threshold that signals the start of a so-called bear market. The Dow has fallen 21 percent from its October all-time high and closed in a bear market on July 2.
The S&P 500 has had eight previous bear markets since 1962, according to data compiled by Birinyi Associates, a stock research firm based in Westport, Connecticut. Stocks have fallen an average of 33 percent over 382 days during those retreats. The Dow has had 12 previous bear markets since 1962, averaging a decline of 29 percent over 322 days.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
Last Updated: July 9, 2008 16:11 EDT
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