U.S. stocks tumbled, pushing the Standard & Poor's 500 Index to the steepest drop since the September 2001 terrorist attacks, as Lehman Brothers Holdings Inc.'s bankruptcy and declining commodities increased speculation that credit-market losses and the economic slowdown will worsen.
Stocks erased more than $600 billion in value as financial shares in the S&P 500 decreased the most since at least 1989, according to data compiled by Bloomberg. American International Group Inc. sank 61 percent and Washington Mutual Inc. decreased 27 percent. Concern the U.S. is heading for a recession pushed oil lower, prompting a drop in energy stocks, and sent General Electric Co. down 8 percent.
"Fear is in charge," said Henry Herrmann, president and chief executive officer of Waddell & Reed Financial Inc. in Overland Park, Kansas, which manages $70 billion. "This blows another hole in the banking system's ability to extend credit."
The S&P 500 declined 59 points, or 4.7 percent, to 1,192.70, the lowest level since October 2005. The Dow Jones Industrial Average tumbled 504.48, or 4.4 percent, to 10,917.51. The MSCI World Index of developed-market equities slumped the most in six years while the 7.6 percent drop in Brazil's Bovespa was the steepest since Sept. 11, 2001. The dollar weakened the most against the yen in a decade and two-year Treasury notes surged.
More than 24 stocks slipped for each that rose on the New York Stock Exchange on concern financial shares will continue their slump. The S&P 500 has fallen 23 percent since an October record as bank losses from the first nationwide decline in U.S. home values since the Great Depression reached $514.6 billion.
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