Banks and profit worries send stocks to session lows

NEW YORK (Reuters) - Stocks fell to session lows on Tuesday as growing troubles in the banking sector and grim profit outlooks underscored the depth of the economic challenges inherited by President Barack Obama.

The sell-off accelerated after the nation's 44th president gave his inaugural address, which provided few new details about how to tackle the growing financial crisis that has rippled through every sector of the economy.

"I think people were looking for something -- new plans, new hopes," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatam, New Jersey.

"They didn't hear something new."

The Dow Jones industrial average <.DJI> fell 189.08 points, or 2.28 percent, to 8,092.14. The Standard & Poor's 500 Index <.SPX> dropped 27.47 points, or 3.23 percent, to 822.65. The Nasdaq Composite Index <.IXIC> tumbled 60.06 points, or 3.93 percent, to 1,469.27.

Since Obama won the election in November, Wall Street has been betting Obama will put plans in place to help stabilize the sliding economy and stem rising unemployment.

Stocks had been in negative territory on Tuesday in any case, led down by banks after State Street Corp , the world's largest money manager for institutions, posted a $6.3 billion unrealized loss in its investment portfolio and lowered its outlook.

The news sparked concerns about the global banking sector and hurt shares of financials including JPMorgan Chase & Co , which was the top drag on the Dow.

The KBW index of banking shares <.BKX> plunged more than 13 percent, its lowest level since 1995.

"Without the banks making some sort of turnaround, the market's just got no traction," Saluzzi said.

"They're not coming clean and until you can clean out the balance sheets of these banks -- and that's going to take a few more quarters -- why would you buy a bank stock?"

Although Wall Street has rebounded from its November 21 intraday low, the broad S&P 500 index has fallen 9 percent this year on worries about the deepening global recession.

Technology shares were pulled down by expectations of poor quarterly results from big-cap tech shares, including International Business Machines Corp .

Big-cap tech companies were also hurt by a rise in the dollar, which makes it difficult for overseas consumers to buy their products, said Robert Francello, head of equity trading for Apex Capital hedge fund in San Francisco.

IBM shed 1.1 percent to $83.95 on the New York Stock Exchange before quarterly results, which are expected after the bell. Apple was also down 4 percent to $78.94, and Microsoft fell 4.1 percent to $18.90; both are also expected to post quarterly results later this week.

Intel , the world's largest chip maker, also fell 3.5 percent to $13.26 after it cut the price of some processors by as much as 48 percent.

(Editing by Chizu Nomiyama)

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