NEW YORK – Stocks tumbled more than 4 percent on Tuesday as investors pummelled bank shares on concerns a reworked plan to shore up the financial sector may not be enough to thaw credit markets and alleviate the deepening recession.
The Dow industrials posted their biggest one-day loss since December 1. Losses accelerated after the Treasury Department rolled out an intensely awaited financial rescue plan, saying it would spend up to $2 trillion to mop up bad bank assets and revive consumer lending.
But investors were sharply disappointed by the lack of detail on how the government will cleanse toxic assets burdening the financial system, triggering a nearly 14 percent slide in the KBW Bank Index (.BKX).
"This is not a clear-cut plan. It is reminiscent of previous plans where there was convoluted calisthenics to try to fix this thing. That's not what investors are looking for," said Bucky Hellwig, an analyst with Morgan Asset Management in Birmingham, Alabama.
All 30 Dow stocks ended deep in the red for the first time since January 20, revealing misgivings about the plan's ability to jump-start the economy.
The Dow Jones industrial average (.DJI) was down 381.99 points, or 4.62 percent, at 7,888.88. The Standard & Poor's 500 Index (.SPX) was down 42.73 points, or 4.91 percent, at 827.16. The Nasdaq Composite Index (.IXIC) was down 66.83 points, or 4.20 percent, at 1,524.73.
Although the Dow posted its lowest close since Dec 1, it is still up 5.9 percent from the November 21 low. The blue chip index is down 1.4 percent for the month and 10.1 percent year-to-date.
The S&P financial index (.GSPF) slid 10.9 percent.
Federal Reserve Chairman Ben Bernanke offered the market little comfort in testimony to Congress on Tuesday after he said the central bank's liquidity expansion was no "panacea."
A government report showing a record plunge in U.S. wholesale inventories in December underscored the economy's fragile state, suggesting that the economy contracted more in the fourth quarter than the government initially estimated.
Shares of Bank of America (BAC.N) slid more than 19 percent to $5.56, while JPMorgan (JPM.N) shed 9.8 percent to $24.62 and shares of Citigroup were down 15.2 percent at $3.35.
Insurers, which like the banks are burdened by money-losing assets on their books, were another hard-hit sector. Shares of U.S. property and life insurer Hartford Financial Services Group (HIG.N) slid 13.2 percent to $13.05 after its credit ratings were cut. Rival MetLife (MET.N), the No. 1 U.S. life insurer, was down 12 percent to $27.53.
Principal Financial (PFG.N), another insurer, tumbled 29.6 percent to $11.99.
The KBW Insurance ETF (KIE.P) fell 9.5 percent.
Boeing (BA.N) was among the top drags on the Dow as it reiterated the delay in the delivery of its latest jetliner, sending its stock down 6.1 percent to $40.21.
McDonald's (MCD.N) fell 3 percent to $57.28 and top retailer Wal-Mart (WMT.N) slid 3.2 percent to $47.72, reflecting concerns about the spending environment. Citigroup cut its earnings estimate and price target on Wal-Mart, expecting pressure on grocers, and Wal-Mart later in the day said it was cutting up to 800 jobs.
Home builder MDC Holdings Inc (MDC.N) reported results that missed Wall Street expectations, and its shares fell 14.8 percent to $30.13. The Dow Jones home construction index (.DJUSHB) tumbled 9.9 percent.
Volume was active on the New York Stock Exchange, where about 1.74 billion shares changed hands, above last year's estimated daily average volume of 1.49 billion shares, while on the Nasdaq, about 2.45 billion shares traded, just above of last year's daily average of 2.28 billion.
Decliners outnumbered advancers on the NYSE by a ratio of about 11 to 2, while on the Nasdaq, about 9 stocks fell for every 2 that rose.