nvestors Dump Shares As Banking Fears Mount

NEW YORK, Jan. 20 -- At the dawn of the Obama presidency, the stock market could not shake its dejection over the rapidly deteriorating state of the banking industry.

Financial stocks led the decline Tuesday, and the Dow Jones industrial average fell 332.13, or 4.01 percent, to 7949.09, its lowest close since Nov. 20.

Broader stock indicators also fell sharply Tuesday. The Standard & Poor's 500-stock index dropped 44.90, or 5.28 percent, to 805.22, and the Nasdaq composite index plunged 88.47, or 5.78 percent, to 1440.86.

During much of President Obama's address, the Dow Jones industrials were down about 150 points. Traders hadn't appeared so focused on TV screens since Sept. 29, when the House initially voted against the banking bailout package and the Dow tumbled 777 points.

The market's most recent bout of angst, which began with multibillion-dollar losses reported last week by Bank of America and Citigroup, intensified after Royal Bank of Scotland's forecast that its losses for 2008 could top $41.3 billion.

A collapse in bank stocks followed: State Street plunged 59 percent Tuesday, Citigroup fell 20 percent, and Bank of America lost 29 percent. Royal Bank of Scotland fell 69 percent in New York trading.

"The reason we're having a panic drop is the fact that Europe is catching our cold, and we could have deeper and deeper problems that could require more and more money. And eventually the government is going to have to stop spending," said Keith Springer, president of Capital Financial Advisory Services. "It's a pretty dangerous situation to be in."

In his address, Obama suggested that Wall Street will see greater oversight: "Without a watchful eye, the market can spin out of control."

The shrinking value of bank stocks means the financial industry accounts for less than 10 percent of the Standard & Poor's 500 for the first time since 1992. At the end of 2006, banks made up 22 percent of the index.

Movers

Regions Financial plunged $1.47, to $4.60, a 24-year low. The firm posted a fourth-quarter loss of $6.24 billion.

Advanta lost 89 cents, to $1.06. An analyst said the credit card issuer is "unlikely to survive."