U.S. stocks tumbled, erasing yesterday’s gains, as Fitch Ratings said further contagion from Europe’s debt crisis will pose a risk to American banks and amid concern higher oil prices will hamper economic growth.
Financial shares led Standard & Poor’s 500 Index losses as Citigroup Inc. (C) and Morgan Stanley dropped at least 4.1 percent. Dell Inc. (DELL) sank 3.2 percent as the personal computer maker told investors to expect slower sales growth for the rest of the year. Abercrombie & Fitch Co. (ANF) tumbled 14 percent as profit at the clothing retailer trailed estimates. Rambus Inc. (RMBS) plunged 61 percent after losing a jury trial against Micron Technology Inc. (MU) and Hynix Semiconductor Inc. Micron surged 23 percent.
The S&P 500 slid 1.7 percent to 1,236.91 at 4 p.m. New York time. The Dow Jones Industrial Average fell 190.57 points, or 1.6 percent, to 11,905.59. Oil rose above $100 a barrel.
“It’s fear of the unknown spooking the market,” Madelynn Matlock, who helps oversee about $14.5 billion at Huntington Asset Advisors in Cincinnati, said in a telephone interview. “There may be more exposure to Europe out there than people really think even if banks think they are covered. It’s going to be a tough market for quite a while,” she said. “Increasing oil prices is a concern because it’s like a tax on the consumer.”
Stocks extended losses after Fitch said that while U.S. lenders have “manageable direct exposures” to Greece, Ireland, Italy, Portugal and Spain, further turmoil in those markets poses a “serious risk.” Equities also fell after the Bank of England Governor Mervyn King said Britain faces a “markedly weaker” outlook for the economy as Europe’s crisis threatens global growth
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