Stocks closed sharply lower as investors remained skittish about the housing slump's toll on the economy and potential credit losses at big financial services companies.
Up until the last hour of trading, major indexes had been stuck in a narrow range, erratically seesawing from negative to little changed for much of the session.
But losses quickly mounted heading toward the close as shares of financial services companies extended their declines.
Shares of Citigroup , the No. 1 U.S. bank, dropped more than 4 percent, while those of Bank of America, the No. 2 U.S. bank, declined more than 3 percent.
"Too Much Fear"
"There's just too much fear in the financials," said John O'Brien, senior vice president at MKM Partners LLC in Cleveland, Ohio. "The fear is back again that the write-downs are kind of a
mystery and no one really knows what the bottom is or what the outcome is going to be."
Energy shares, including ExxonMobil, also weighed on the broader market as they dropped in sync with crude oil prices.
On the Nasdaq, investors again sold shares of the tech sector's recent darlings, including BlackBerry maker Research in Motion.
Shares of American International Group led the Dow's biggest decliners after a brokerage cut its price target on the insurer's stock, citing the impact of the credit turmoil.
Chief Executive John Stumpf of Wells Fargo , the No. 2 U.S. mortgage lender, said at a conference that the U.S. housing downturn was far from over and was the worst since the Great Depression.
Shares of Fannie Mae , the largest U.S. home funding source, tumbled 9.4 percent while shares of Freddie Mac , the No. 2 U.S. home funding company, shed 4.4.
Worries About Retailers
JC Penney dimmed hopes that holiday shopping would be strong as it reported a 9 percent dropin quarterly profit and said its sales weakened "dramatically" in September and October.
Barclays , Britain's third-largest bank, checked in with a $2.7 billion writedown between July and October that was actually less than expected. But while shares initially jumped more than 6 percent after the update, the stock slipped as analysts said BarCap's growth this year and next will be restricted, and that market conditions remain unpredictable.
Dow component General Electric became the latest casualty of the credit turmoil. A $5 billion short-term bond fund run by GE's asset management unit is offering investors an option to redeem their holdings at 96 cents on the dollar.
In a Nov. 8 e-mail to institutional investors, GE Asset Management said "extreme conditions in the credit markets" are forcing the fund to sell securities at a loss.
NovaStar Financial shares sank by roughly half after the company, which has halted subprime mortgage lending, posted a big quarterly loss and said bankruptcy is possible. Shares are expected to be delisted on the New York Stock Exchange in the next several weeks.
In earnings news, Applied Materials , the largest supplier of tools for making microchips, gave a profit forecast far below Wall Street expectations, stirring concerns about holiday-season sales and sending its shares briefly down, before rallying on the belief that company's overall fundamentals were still strong.
Tyco International reported sharply lower quarterly net profit, but earnings and sales from continuing businesses topped Wall Street forecasts, while Upscale home furnishings retailer Williams-Sonoma posted lower quarterly profit, but beat analysts' expectations.
Elsewhere, Ralcorp Holdings saw a big gain after it said it would acquire Kraft Foods' Post cereals business in an all-stock dealvalued at about $1.65 billion.