U.S. stocks tumbled the most in almost a year on Tuesday after service industries contracted at the fastest pace since 2001, adding to mounting concern the economy is already in a recession.
The Dow and S&P 500 had their biggest drops since February 27, 2007. The S&P 500 lost 44.18, or 3.2 percent, to 1,336.64. The Dow Jones Industrial Average decreased 370.03, or 2.9 percent, to 12,265.13. It was the worst percentage decline for the Dow since February 2007, when the index fell 3.3 percent. It was also its worst point drop since August.
The Nasdaq Composite Index slipped 73.28, or 3.1 percent, to 2,309.57. Shares also retreated in Asia and Europe. Almost 11 stocks fell for every one that rose on the New York Stock Exchange.
Recession fears hit sectors across the board, leaving financial services stocks particularly hard hit. Banks were affected after the S&P said any loss of a top credit rating by a major bond insurer could force banks to put hobbled bonds back on their balance sheets, limiting funds available for basic lending.
Citigroup Inc. led the S&P downturn as 91 of 92 financial shares in the index fell lower after Fitch Ratings said it may downgrade the AAA insurance rating on MBIA Inc., the largest bond guarantor.
Overall, the S&P 500 has lost 9 percent so far this year, making it the worst- ever start to a year in the benchmark's eight-decade history. The Dow dropped 7.5 percent this year while the Nasdaq has falled 13 percent. This week alone, the S&P 500 fell 4.2 percent, the steepest two-day retreat since January 2003.
Goldman Sachs Group Inc. dropped $10.94, or 5.5 percent, to $189.86, the largest decline since December 11. Citigroup Inc shares dropped 7.4 percent to $27.05.