Stocks fell sharply Monday as fear rippled through the market with cracks starting to show in the global financial system and a House vote on the Wall Street bailout bill due later today.
The Dow Jones Industrial Average, was off more than 2.5 percent, while the S&P 500 andNasdaq shed more than 3.5 percent. The CBOE Volatility Index, widely viewed as the best gauge of fear in the market, surged to a nearly six-year high.
Among the top drags on the Dow: Financials — Bank of America , JPMorgan and American Express — took a hit amid worries about the financial system; IBM fell as investors sold off techs amid worried that the global slowdown will drag down tech spending; and, energy stocks like Chevron skidded as oil fell below $100 a barrel.
Veteran trader Art Cashin, director of floor operations at UBS, told CNBC this morning that he learned early on in his career never to bet on the end of the world — it only happens once.
Still, he said, "It might not be a bad idea to find a bomb shelter somewhere."
Investors took some encouragement from news that there was a resolution without a federal bailout on another troubled bank: Citigroup is acquiring most of Wachovia's assets.
Citigroup is buying Wachovia's banking operationsin a deal facilitated by the FDIC,after engaging in a brief bidding war with Wells Fargo.
Citigroup shares rose 4 percent. Wachovia shares weren't yet open after crumbling from $10 Friday to below $1 in premarket trading.
But investors hammered shares of other banks, wondering which one might be next to fall. Among the biggest decliners was National City , the most actively-traded stock on the NYSE, which fell by 50 percent. Fifth Third , Sovereign Bancorp and First Federal (of California) all shed more than 30 percent.
"There are a number of regional banks which may need help, either because of the weakening mortgage market or simply because of the weakening economy," Michael Sheldon, chief market strategist at RDM Financial Group, told Reuters.
Morgan Stanley shares fell nearly 8 percent following news that Japan's biggest bank, Mitsubishi UFJ Financial Group, will take a 21 percent stake in the Wall Street firm.
Meanwhile, Lehman Brothers is expected to announce the sale of its prized money-management unit, Neuberger Berman, by 1:30 p.m. ET today. On Sunday night, two source told Reuters that private-equity firms Bain Capital and Hellman & Friedman were close to a deal for the unit.