NEW YORK - Investors are back to worrying about banks.
Long-present unease about soured loans bubbled over on Monday after Bank of America Corp. said it set aside $13.4 billion to cover lending losses even as it posted earnings that beat expectations. Other big banks also increased loss provisions in the past two weeks.
Financial stocks suffered some of the day's worst declines and major market indicators tumbled more than 3 percent, including the Dow Jones industrial average, which fell 290 points.
Bank of America plunged 24.3 percent and Citigroup fell 19 percent as investors became worried that cleaning up bad loans from banks' balance sheets may have farther to go than many had anticipated.
Skepticism on banks
Joe Saluzzi, co-head of equity trading at Themis Trading, said traders are now viewing bank earnings with more skepticism and believe that the better-than-expected profit reports may be disguising problems.
"They're looking at bank numbers and are saying they are not that great," Saluzzi said.
Even without growing anxiety about financial stocks, traders had been looking for some pullback after the Dow jumped 24 percent from 12-year lows in early March.
Energy and materials companies also fell, along with the prices of key commodities they rely on such as crude oil.
The market declines were broad and deep, outweighing what would otherwise be positive news about a step-up in deal activity. After a deal with IBM Corp. didn't work out, troubled technology company Sun Microsystems found a buyer in Oracle, a leading maker of business software, while PepsiCo Inc. said it would bid $6 billion to buy its two biggest bottlers.
Other indexes dropped, too
The Dow fell 289.60, or 3.6 percent, to 7,841.73.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 37.21, or 4.3 percent, to 832.39, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.
About 10 stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.8 billion shares.
Light, sweet crude fell $4.45 to $45.88 a barrel on the New York Mercantile Exchange.
ASSOCIATED PRESS
