Exxon Mobil Corp. slid the most since March as crude fell more than $6 a barrel on concern a slower economy will curtail demand. Fannie Mae and Freddie Mac, the largest U.S. mortgage- finance companies, tumbled more than 26 percent. The S&P 500 Financials Index dropped 3 percent, capping its steepest-ever five-day retreat.
The S&P 500 slipped 13.39 points, or 1.1 percent, to 1,214.91. The Dow Jones Industrial Average lost 92.65, or 0.8 percent, to 10,962.54, its first close below 11,000 in two years. The Nasdaq Composite Index added 2.84, or 0.1 percent, to 2,215.71. Two stocks fell for each that rose on the New York Stock Exchange.
Benchmark indexes tumbled as much as 2 percent in morning trading and the dollar weakened the most against the yen since March and touched a record low against the euro after Federal Reserve Chairman Ben S. Bernanke said the risks of an economic slowdown and faster inflation are increasing. Swings in financial shares sent the S&P 500 careening between gains and losses at least 12 times in the afternoon.
Exxon, the largest U.S. oil company, slid $3.23, or 3.8 percent, to $82.19, leading energy shares in the S&P 500 to a 4.2 percent retreat, the most among 10 industries. Crude oil for August delivery fell 4.5 percent to $138.69 a barrel in New York.
Freddie Mac lost $1.85 to $5.26, extending a 17-year low. Fannie Mae retreated $2.66, or 27 percent, to $7.07, its steepest loss since at least 1980.
While Freddie Mac and Fannie Mae's shares have tumbled this year, Vanguard Group and Federated Investors Inc. said they will continue to buy the short-term debt of the companies. The cost to protect debt of Fannie Mae and Freddie Mac from default fell to the lowest in two months yesterday.
The division between bonds and stocks shows that while investors are confident Treasury Secretary Henry Paulson won't permit the collapse of the two companies, shareholders are at greater risk because the government-sponsored companies may require new equity after already raising $20 billion in the past year to cover losses.
More than $13 trillion has been wiped off the value of global equities since October as $416 billion in credit-related losses prolonged the global economy's slump and rising commodity prices stoke inflation. Among the 23 industrialized nations in the MSCI World Index, only Canada has averted a bear market.
Financial, telephone and consumer shares led the S&P 500's 17 percent retreat this year even as the Fed slashed its benchmark interest rate seven times since September to bolster debt markets and make borrowing cheaper.
The S&P 500 trades for 20.1 times the reported earnings of companies in the index, while the MSCI World trades for 13.8 times, according to data compiled by Bloomberg. Last week, the S&P 500 was the most expensive relative to the MSCI World, excluding the U.S., on a price-to-earnings basis since 2001, Bloomberg data show.