AIG, the world's largest insurer, tumbled 5 percent after Credit Suisse Group said the company may lose $2.41 billion this quarter on mortgage-related writedowns. Washington Mutual Inc. and Huntington Bancshares Inc. each dropped more than 4 percent after Columbian Bank & Trust Co. became the ninth U.S. bank to collapse this year. Lehman Brothers Holdings Inc. slumped 7 percent on concern a Korean bank will reconsider a potential investment in the fourth-biggest U.S. securities firm.
The S&P 500 dropped 15.31, or 1.2 percent, to 1,276.89 as of 11:28 a.m. in New York. The Dow Jones Industrial Average slid 135.07, or 1.2 percent, to 11,492.99. The Nasdaq Composite Index decreased 37.96 to 2,376.75. More than five stocks retreated for each that rose on the New York Stock Exchange.
All 10 industry groups in the S&P 500 retreated as the index extended its first weekly decline since July. The benchmark for American equities slipped 0.5 percent last week as energy prices climbed and concern grew that the government may need to bail out Fannie Mae and Freddie Mac.
Stocks fell even after a report showed sales of previously owned homes in the U.S. rose in July from a 10-year low as declining prices helped stabilize demand. About 242 million shares changed hands on the NYSE, 17 percent less than at the same time last week.