New York - US stocks tumbled and the S&P 500 entered bear market territory on Tuesday as European officials postponed a vital aid payment to debt-stricken Greece.
Wall Street fell about 2%, extending the previous day’s decline to 13-month lows as investors feared the crisis in Europe could throw the United States into a new recession.
Concerns over Europe’s financial system have contributed to equity losses over the past several months. With Tuesday’s drop, the benchmark S&P has fallen more than 20 from an intraday high reached in early May, putting it into bear market territory.
“There’s indiscriminate selling at this point, without any real justification. No one really understands what’s going on in Europe, and until we get more clarity I doubt if we’ll see much interest in buying,” said Eric Green, senior portfolio manager and director of research at Philadelphia-based Penn Capital Management, which oversees $6.5bn.
The Dow Jones industrial average slid 2.18%, Standard & Poor’s 500 Index was down 2.06% and the Nasdaq Composite Index dropped 1.38%.
US banks continued to be pressured by Europe’s fragile finances. Morgan Stanley fell 6.3% to $11.68 and is down more than 56% this year.
Adding to market pessimism, Goldman Sachs cut its gross domestic product outlook for advanced economies for 2012, lowering its growth forecast to 1.3% from 2.1%.
“The main driver of our shift in views has been the escalation of bank funding stress in the Euro area, alongside deeper public budget cuts in a number of European countries,” Goldman said in a note.
The STOXX Europe 600 Banking Index sank nearly 5% as European officials reviewed a plan for banks to take bigger losses on Greek debt and on expectations Greece would default soon.
Franco-Belgian bank Dexia dropped 19.2% to a record low as investors focused on its heavy exposure to Greek debt. European shares tumbled 3.1%.
European officials also delayed a vital aid payment to Athens until mid-November.
Later on Tuesday, US Federal Reserve chairperson Ben Bernanke will testify before the joint economic committee in Washington on the economic outlook.