Dow Drops Over 200; Goldman Ends Higher

Stocks had their worst drop in months Tuesday, falling to session lows in the final minutes of trading, after the debt ratings on Greece and Portugal were downgraded.

The Dow lost 213.04, or 1.9 percent, to close at 10,991.99, snapping a six-day winning streak. It was the biggest point and percentage decline since February. Alcoa , DuPont and Caterpillar were the biggest decliners.

The S&P 500 shed 2.3 percent and the Nasdaq dropped 2 percent.

The CBOE volatility index, widely considered the best gauge of fear in the market, shot up more than 30 percent, its biggest one-day jump since October 2008, finishing above 22.

Investors were clearly playing it safe, with health care, telecoms and utilities the day's best performers.

And, some traders cautioned that the market was likely in for another wild ride tomorrow.

"Investors should prepare themselves for intense volatility in the equity markets tomorrow," said Todd Schoenberger, managing director at LandColt Trading.

"The Blankfein testimony will definitely impact trading, because his words will probably set the populist stage for the degree of financial reform we can expect to envelope the industry," Schoenberger explained. "Add in the FOMC decision and the 'extended period' language, and we will be in for a roller coaster day. Everyone should enter at their own risk!"

Standard & Poor's downgraded Greek debtto junk territory amid concerns about the nation's ability to make the necessary reforms to curb its debt problems.

And the S&P downgraded its rating on Portugal's debt by two notches to A-minus.

"The recent problems faced by Greece are only the tip of a sovereign-debt icebergin many advanced economies,” Nouriel Roubini, the economist nicknamed "Dr. Doom," wrote on his Web site RGE Monitor.

The dollar hit a one-year high against the euro, while gold pricessoared to $1,171 an ounce. Oil pricesslipped below $83 a barrel.

Financials were the day's biggest decliners, down 3.4 percent, amid worries about financial reform, which is currently being kicked around in Congress.

But Goldman Sachs shares ended higher, even as a Senate panel grilled Goldman executives, including Fabrice "The Fabulous Fab" Tourre, the trader at the center of the SEC's fraud case against the firm.

Tourre said he does not recall telling investors that a Goldman hedge fund client had bought into an investment that soured. "I deny—categorically—the SEC's allegation," he said. "And I will defend myself in court against this false claim."

CEO Lloyd Blankfein hasn't yet testified. According to prepared testimony, Blankfein is expected to repeat the company's assertion that it "certainly did not bet against ... clients."
Citigroup shares fell nearly 6 percent following the Treasury's announcement on Monday that it plans to sell up to 1.5 billion of its Citigroup shares. The Treasury owns 7.7 billion shares of the financial giant, and additional sales are expected to follow.

Ford shares fell more than 6 percent after the auto maker beat earnings expectations but sales disappointed.

DuPont reported its profit doubled and raised its forecast, while 3Mbeat on both earnings and its outlook.

DuPont shares fell, while 3M was the only gainer on the Dow.

After the bell on Monday, Texas Instruments exceeded expectations and boosted its revenue guidance, and at least five brokerages raised their price targets on the chip maker, but the stock skidded more than 2 percent today.

US Steel reported a smaller than expected loss and said it expects to return to profitability in the second quarter.

UPS reported sharply higher earnings and backed its outlook, after pre-announcing a week or so ago.

After the bell, earnings reports from Broadcom and Norfolk Southern will be released, among others. Wednesday morning's notable reports include Comcast, Dow Chemical and Sprint Nextel.

IBM raised its quarterly dividend and expanded its share buyback. The company's board boosted its quarterly dividend to 65 cents from 55 cents a share ahead of its annual shareholder meeting.

Activision, Take Two and Electronic Arts shares fell after the Supreme Court agreed to decide whether a California law that will ban the sale of violent videogames to minors is constitutional.

Meanwhile, the Fed kicked off its rate-setting meeting with the latest decision and statement due Wednesday afternoon. There is more than the usual amount of speculation that the central bank will start changing its language.

Investors shrugged off some encouraging U.S. economic data: A gauge of consumer confidence jumped to 57.9 in April, the highest since just before the financial crisis in September 2008, and home prices fell 0.9 percent in February from the previous month but were up year-over-year for the first time since December 2006.

A weak auction of the latest two-year notes put a damper on an otherwise powerful rally for Treasurys. The $44 billion sale fetched a high yield of 1.024 percent and the bid-to-cover ratio was 3.03.

Auctions of 5-year notes and 7-year bonds are expected in the next two days respectively.

Volume was higher than usual, with 1.67 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 16 to 1.

This Week:

TUESDAY: 3G iPads to ship; two-day Fed meeting begins; Earnings from Broadcom after the bell
WEDNESDAY: GE and BofA shareholder meetings; Weekly mortgage applications; Weekly crude inventories; Fed announcement (2:15 PM ET); Earnings from Comcast, Corning, Sprint, Visa
THURSDAY: Weekly jobless claims; Earnings from ExxonMobil, ConocoPhillips, P&G, Aetna, Bristol-Myers Squibb, Burger King, Kellogg, Motorola, Time Warner Cable, Viacom
FRIDAY: Berkshire Hathaway annual meeting; AT&T shareholder meetings; GDP; consumer sentiment; Earnings from Chevron

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