By Kristina Cooke
NEW YORK (Reuters) - Stocks slid on Tuesday as a sell-off in financial shares accelerated and fears mounted that the rapidly spreading credit crisis would drag the economy into recession.
Federal Reserve Chairman Ben Bernanke did little to reassure markets when he cautioned that downside risks to economic growth have worsened. An earlier move by the Federal Reserve to unclog the commercial paper market, which companies use to fund their day-to-day operations, gave the market only a short-lived boost.
The financial sector was the biggest drag on the market, with the S&P financial sub-index tumbling to its lowest level since May 1997.
Bank of America skidded 20 percent the day after it said it would cut its dividend and raise $10 billion to help staunch rising loan losses.
Traders said there was some disappointment that central banks had not orchestrated a coordinated interest-rate cut to calm financial markets.
"In the absence of any constructive and meaningful news out of any recognized fiscal, financial or monetary authority, the market is staying on track for self-destruction," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
The Dow Jones industrial average fell 176.82 points, or 1.78 percent, to 9,778.68. The Standard & Poor's 500 Index dropped 21.55 points, or 2.04 percent, to 1,035.34. The Nasdaq Composite Index was down 50.13 points, or 2.69 percent, at 1,812.83.
The losses came a day after a steep global market sell-off.
The price of oil rose back above $90 a barrel, increasing concerns about consumer and business spending. An index of airline stocks fell almost 12 percent.
Alcoa Inc is scheduled to report quarterly results after the closing bell. Shares of the aluminum producer dipped 0.3 percent to $18.04.
(Additional reporting by Ellis Mnyandu; Editing by Jan Paschal)
