U.S. stocks tumbled the most in two months after earnings reports from banks, manufacturers and industrial companies heightened concern about the health of financial markets and the economy.
The Dow Jones Industrial Average lost 367 points and closed at the lowest since the Federal Reserve cut its benchmark lending rate Sept. 18. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. led financial shares to their worst week since 2002 after Wachovia Corp. said loan defaults reduced profit. Energy producers dropped the most in two years.
The retreat pushed benchmark indexes to their biggest weekly loss since July. Two-year Treasury notes rallied the most since September 2001 as investors sought the safety of government debt. The Standard & Poor's 500 Index 500 slipped 39.45, or 2.6 percent, to 1,500.63. The Dow declined 2.6 percent to 13,522.02. The Nasdaq Composite Index slid 74.15, or 2.7 percent, to 2,725.16.
S&P 500 companies have posted an average profit decline of 0.6 percent in the third quarter, the first drop since 2002, according to Bloomberg data. Twenty-seven percent of the 132 companies in the index that have reported results so far have trailed analysts' estimates, compared with 21 percent in the second quarter.
The S&P 500 fell 3.9 percent this week and the Dow average lost 4.1 percent. The Nasdaq declined 2.9 percent.
All 10 industry groups in the S&P 500 decreased today, with 481 of the index's members posting declines. Energy shares posted the steepest decline after crude oil retreated from a record. More than 17 stocks dropped for every one that gained on the New York Stock Exchange. A gauge of stock-market volatility rose the most since March 13.
The S&P 500 Financials Index fell 2.9 percent today, its biggest drop since Aug. 28, and has retreated 11.3 percent this year.
Merrill Lynch & Co., the biggest U.S. brokerage, tumbled $3.81, or 5.4 percent, to $66.26. Morgan Stanley, the second- biggest U.S. investment bank, slid $3.45, or 5.3 percent, to $61.95. Goldman Sachs Group Inc., the most profitable securities firm, slid $10.16, or 4.5 percent, to $217.69.
Caterpillar Inc. decreased $4.09, or 5.3 percent, to $73.57 for its largest drop in a year. The housing slump will lead to a 12 percent decline in North American machinery and engine sales this year, Caterpillar said. Earnings will be $5.20 to $5.60 a share in 2007, down from a July projection of $5.30 to $5.80, the company said.
Traders increased wagers that the Fed will lower its benchmark interest rate to 4.25 percent by the end of the year after S&P lowered ratings on about $22 billion of mortgage securities and Cheyne Finance Plc and Rhinebridge Plc, two structured investment vehicles that bought securities backed by home loans, defaulted on more than $7 billion of debt.
Today is the 20th anniversary of ``Black Monday,'' when an increase in U.S. interest rates and slowing economic growth sparked a panic that sent the Dow average down 23 percent in one day. The 30-stock gauge would have to fall 3,110 points at today's level for a drop of that scale.