Washington Mutual Inc., the largest U.S. savings and loan, declined the most in 20 years after New York Attorney General Andrew Cuomo said there's a ``pattern of collusion'' in the bank's home-loan appraisals. Fannie Mae posted its steepest drop since 2005 and Freddie Mac sank to a seven-year low after Cuomo subpoenaed the two biggest U.S. providers of mortgage financing. GM slid after writing down $39 billion in tax benefits.
The Standard & Poor's 500 Index lost 44.65, or 2.9 percent, to 1,475.62, its biggest drop since Aug. 9 and lowest level since Sept. 12. The Dow Jones Industrial Average retreated 360.92, or 2.6 percent, to 13,300.02. The Nasdaq Composite Index decreased 76.42, or 2.7 percent, to 2,748.76, the largest decline since Feb. 27. More than 12 stocks fell for every one that gained on the New York Stock Exchange.
The collapse of the subprime mortgage market has dragged financial shares down 18 percent this year, prompted the Fed to cut interest rates and accelerated a sell-off in the U.S. currency. The dollar fell to the lowest in 30 years against a basket of six rivals today after Chinese officials said they plan to move some of the nation's $1.43 trillion of foreign-exchange reserves into stronger currencies.
All 10 industry groups in the S&P 500 fell at least 1 percent, led by the biggest drop in financials in five years.
The S&P 500 Financials Index dropped 5.1 percent, the biggest decline since July 2002. The gauge fell to its lowest level in two years as all 93 members retreated. Banks, brokerages, insurance companies and other financial firms have tumbled this year after their holdings of mortgage-related securities declined in value and investors speculated more losses lie ahead.