Dow Drops 508 Points; Lending Markets Frozen

By MICHAEL M. GRYNBAUM 18 minutes ago

Wall Street extended its heavy losses as concern about the financial sector wiped out early enthusiasm over the Fed’s efforts to inject confidence into the credit markets.

Stocks skidded lower on Tuesday afternoon despite reassurances from the chairman of the Federal Reserve, Ben S. Bernanke, that the central bank was prepared to lower interest rates, words that many investors had said they were waiting to hear.

“You are getting all the things that you would think the equity markets would respond very favorably to,” Steve Sachs, director of trading at Rydex Investments, said. “But at this point it just doesn’t seem to be doing it. It’s the attitude of sell regardless of what the news is.”

The Dow Jones industrial average, which had fallen about 140 points before Mr. Bernanke’s remarks, dipped to a 300-point deficit before climbing back. At the close, the blue-chip index was down more than 508.39 points or 5.11 percent to 9,447.11, with shares of banks and real estate firms shouldering the biggest losses.

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