Stocks tumbled and the S&P 500 entered bear market territory on Tuesday as European officials postponed a vital aid payment to debt-stricken Greece.
Wall Street fell about 2 percent, extending the previous day's decline to 13-month lows as investors feared the crisis in Europe could throw the United States into a new recession.
Concerns over Europe's financial system have contributed to equity losses over the past several months. With Tuesday's drop, the benchmark S&P has fallen more than 20 percent from an intraday high reached in early May, putting it into bear market territory.
There's indiscriminate selling at this point, without any real justification. No one really understands what's going on in Europe, and until we get more clarity I doubt if we'll see much interest in buying, said Eric Green, senior portfolio manager and director of research at Philadelphia-based Penn Capital Management, which oversees $6.5 billion.
The Dow Jones industrial average <.DJI> slid 232.19 points, or 2.18 percent, at 10,423.11. The Standard & Poor's 500 Index <.SPX> was down 22.69 points, or 2.06 percent, at 1,076.54. The Nasdaq Composite Index <.IXIC> dropped 32.30 points, or 1.38 percent, at 2,303.53.
U.S. banks continued to be pressured by Europe's fragile finances. Morgan Stanley
Adding to market pessimism, Goldman Sachs cut its gross domestic product outlook for advanced economies for 2012, lowering its growth forecast to 1.3 percent from 2.1 percent.
The main driver of our shift in views has been the escalation of bank funding stress in the Euro area, alongside deeper public budget cuts in a number of European countries, Goldman said in a note.
The STOXX Europe 600 Banking Index <.SX7P> sank nearly 5 percent as European officials reviewed a plan for banks to take bigger losses on Greek debt and on expectations Greece would default soon.
Franco-Belgian bank Dexia
European officials also delayed a vital aid payment to Athens until mid-November.
Later Tuesday, U.S. Federal Reserve Chairman Ben Bernanke will testify before the Joint Economic Committee in Washington on the economic outlook.
Ford Motor Co
(Editing by Jeffrey Benkoe)