Stocks fell sharply Wednesday as worries about more credit losses in the banking sector and the earnings season overall took a toll on stocks.
The Dow Jones Industrial Average was down nearly 300 points in morning trading, following a five-day losing streak that shaved 7 percent from the blue-chip average.
The S&P 500and Nasdaq managed to scrape a gain in the last session, but volatility and uncertainty remained. Investors are worried about earnings, questions surrounding the status of Treasury Secretary nominee Timothy Geithner's former housekeeper and the incoming Obama administration.
Indeed, the CBOE volatility index, or VIX, was up 10 percent at about 48.
Economic data offered the market no pick-me-up: Retail sales dropped by 2.7 percent in December, much larger than the 1.4-percent decline expected. November was also revised to show a sharper decline than previously expected.
Meanwhile, import and export prices fell for a fifth straight monthin December as costs for oil and even many nonpetroleum products declined. However, the decline was smaller than expected. And business inventories shrunk more than expected in November, suggesting that businesses are liquidating supplies to better match demand, though falling prices have also dented the value of inventories. (The inventories numbers aren't inflation-adjusted.)
Still to come, the Federal Reserve issues its beige-book report of economic conditions from around the country this afternoon.
Financials led the decline amid worries about more fallout in the sector.
Citigroup shares fell below $5, a critical mark where some institutional investors may choose to dump the stock, as analysts speculated that that the company's decision to shed its Smith Barney brokerage unit was the precursor to a complete breakup of the company and that its going to need a lot more capital.
"You'd think the news on banks is baked in, but there's still a lot of headwinds," Rich Parker, head of trading at Stanford Group, told Reuters.
Plus, Parker said, the write-downs are "starting to really scare people outside of the banking area as well."
Meanwhile, Citigroup, like JPMorgan , bumped up its earnings and now plans to report on Friday. JPMorgan reports Thursday, a week ahead of schedule.
JPMorgan shed about 5 percent, while Bank of America lost 3 percent.
American depositary shares of HSBC declined amid worries that Europe's biggest bank may have to raise $30 billion in capital. For the year, the company said it expected to post a loss of 3.9 billion euros, or $5.14 billion.
Bank of America slipped after analyst Richard Bove of Ladenburg Thalman cut both his 2008 and 2009 forecasts for the company, saying it faced large losses from higher net charge-offs, loan reserves and trading losses.
And Deutsche Bank tumbled after it said it expects to post a $6.4 billion quarterly loss because of weakness in its credit rating and other issues.
Crude oil dropped below $37 a barrel after a report showed crude inventories grew by 1.2 million barrels last week.
Upscale jeweler Tiffany reported its same-store sales fell 24 percentthis holiday season and warned that the softness would take a toll on its fourth-quarter earnings. The company also issued a full-year profit warning.
The morning was also dotted with a trio of banruptcy filings: west coast department-store chain Gottschalks, family-apparel chain Goody's and telephone-equipment maker Nortel Networks .
Numerous criminal cases were dominating the financial landscape with UBS banker Raoul Weil formally declared a fugitive by the U.S. and investment manager-turned-fugitive Marcus Schrenker was found, after a three-day run from the authorities that involved him jumping out of a plane and fleeing on a red motorcycle he had stashed near the site of his landing.
The world’s biggest listed hedge fund, Man Group, will take legal action with its investors over exposure to the alleged fraud by U.S. financier Bernard Madoff, Chief Executive Peter Clarke told Reuters in an interview.
--Detroit Auto Show (Jan. 11-25)--
WEDNESDAY: Weekly crude inventories; Fed's Stern speaks; Fed's beige book; Earnings from Xilinx
THURSDAY: ECB announcement; PPI; weekly jobless claims; Philadelphia, NY Fed surveys; Earnings from JPMorgan, Genentech, Intel
FRIDAY: CPI; industrial output; consumer sentiment; Fed's Lacker speaks; Earnings from Citigroup