U.S. stocks extended losses Thursday, pushing the Dow Jones and the S&P 500 down more than 1 percent, after Federal Reserve Chairman Ben S. Bernanke said some smaller banks are likely to fail and jobless claims rose.
Federal Reserve Chairman Ben Bernanke spent a second day on Capitol Hill, telling lawmakers that rising inflation is making his task more complicated.
The Standard & Poor's 500 Index continued to drop after Bernanke said that in many cases small banks will probably collapse if they fail to raise more capital. JPMorgan Chase & Co. led financial shares to their first drop in five days after Goldman Sachs Group Inc. and Merrill Lynch & Co. cut their profit estimates.
The S&P 500 declined 15.67 points, or 1.14 percent, to 1,364.35 at 11:52 a.m. in New York. The Dow Jones Industrial Average decreased 147.67, or 1.16 percent, to 12,546.61. The Nasdaq Composite Index lost 27.79, or 1.18 percent, to 147.67. About seven stocks fell for every two that rose on the New York Stock Exchange.
The S&P 500 has dropped 6.9 percent this year on concern the collapse of subprime mortgages and a slowdown in the world's largest economy will drag down profits.
The Labor Department reported that initial jobless claims rose by 19,000 to 373,000 in the week ending February 23. Meanwhile, the U.S. economy's growth rate in the fourth quarter grew was at an annual rate of 0.6 percent, lower than forecast and hinted reduced estimates for spending and construction.
JPMorgan lost $1.57 to $42.84, Goldman Sachs shed $4.56 to $176.24 while Merrill Lynch lost $2.11 to $52.10 in morning trading.
Sprint Nextel Corp., the third-biggest U.S. wireless carrier, retreated to a five-year low after reporting a record $29.5 billion loss. Shares in the group, which also cancelled its dividend, fell nearly 8% in early trading.
Stocks had a mixed session on Wednesday as the Federal Reserve signaled more rate cuts and expressed caution about the economy and inflation.