Wall Street drops as BofA fuels fears on banks

NEW YORK (Reuters) - Stocks fell on Friday as news that Bank of America received a fresh $20 billion government capital injection sparked concerns that Washington's efforts are failing to stabilize the financial sector.

Financial shares were broadly lower, with Bank of America down more than 10 percent to $7.43, while shares of JPMorgan slid 9.2 percent to $22.09. Both stocks ranked among the top drags on the Dow.

The S&P financial index <.GSPF> tumbled 4.3 percent, sharply extending losses after a steep fall in shares of Britain's Barclays in late European trading.

The S&P financial index was on course for a second straight weekly drop.

"Coming into 2009, we thought we had the big bailouts past us as far as the financials are concerned, and that we can take TARP money and put it toward something else," said Matt McCall, president of Penn Financial Group in Ridgewood, New Jersey.

"Now it's clear that there could be more big banks coming back to the well, asking the government for money. And when does this end and when do they say no? They just keep writing checks."

The Dow Jones industrial average <.DJI> fell 49.62 points, or 0.60 percent, to 8,162.87. The Standard & Poor's 500 Index <.SPX> dropped 6.65 points, or 0.79 percent, to 837.09. The Nasdaq Composite Index <.IXIC> shed 12.03 points, or 0.80 percent, to 1,499.81.

Indexes earlier had been up more than 1 percent before reversing at midday.

(Editing by Leslie Adler)