US stocks tumbled last night sending financial shares to their worst drop in eight years, after home sales slid more than forecast and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion.
Citigroup, Bank of America and Goldman Sachs Group retreated and shares of builders posted their biggest decline ever as a report showed sales of previously owned homes fell to the lowest level in a decade.
Ford plunged the most since August 2000 after reporting a loss twice as big as analysts estimated.
"I would feel very uncomfortable for the average investor to get too aggressive in financials," said Stephen Wood, who helps manage $213 billion as a senior portfolio strategist at Russell Investments in New York.
The recovery in the housing market "isn't going to be coming any time soon." The Standard & Poor's 500 Index dropped the most since June 26th, losing 29.65 points, or 2.3 percent, to 1,252.54.
The Dow Jones Industrial Average slid 283.1, or 2.4 per cent, to 11,349.28. The Nasdaq Composite Index tumbled 45.77, or 2 per cent, to 2,280.11.