Wall Street slid from the open Thursday, and the downturn accelerated once Federal Reserve Chairman Ben Bernanke testified in front of the Senate Banking Committee.
Investors looking for an excuse to take profits got their wish, when Bernanke said the Fed is projecting slower growth for 2008 than previously forecast. Still, Bernanke does not expect a U.S. recession, suggesting instead that a slowdown will be followed by a rebound to a stronger expansion in the latter part of 2008. (See: "Outlook Hazy")
The market's fall picked up steam after Bernanke's testimony, and the Dow finished the day down 175 points, or 1.4%, to 12,377. The S&P 500 fell 18 points, or 1.3%, to 1,349, while the Nasdaq was off 41 points, or 1.7%, to 2,333. The declines come after a rare three-day winning streak.
Treasury-bond prices fell as investors saw Bernanke's remarks as indicative of additional rate cuts, which could cause rising inflation. The yield on the benchmark 10-year note climbed to 3.85% from 3.69% late Wednesday.
Financial stocks had a rough session, as the major bond insurers shared the Washington spotlight with Bernanke. Executives from MBIA (nyse: MBI - news - people ) and Ambac Financial Group (nyse: ABK - news - people ), along with New York insurance regulator Eric Dinallo, testified in a separate house hearing on a day when rival Financial Guaranty Insurance lost its AAA financial strength rating at Moody's (nyse: MCO - news - people ).
One proposal regulators have discussed with the bond insurers is separating their municipal bond business from their structured-finance operations, as the latter have sparked the present turmoil in world financial markets. (See: "Bond Insurers Need Help -- Fast")
Shares of the bond insurers bucked the day's trends to post gains, with MBIA up 9% and Ambac gaining 15%.
The broader financial sector was not as fortunate,though, with the major banks and brokers all in negative territory after UBS (nyse: UBS - news - people ) reported a hefty fourth-quarter loss. The Swiss bank lost $11.3 billion in the quarter, due to a $13.7 billion write-down of subprime-related assets. (See: "UBS: From Bad To Worse") Shares of UBS were down 8% late in the day.
Intel (nasdaq: INTC - news - people ) led the decline among the Dow industrials, almost all of which were lower as trading ended. The chip-maker dropped more than 3%, after analysts said it may be hurt by a slowdown in computer sales.
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