(Updates to mid-afternoon, changes byline)
* Dow enters bear market territory
* Record oil prices stir inflation, spending worry
* Moody's may cut Morgan Stanley debt
By Cal Mankowski
NEW YORK, June 27 (Reuters) - Stocks fell sharply on
Friday, as concerns about the impact of record oil prices on
the economy and fears of more credit losses in the bank sector
rattled investors.
The drop in the Dow had pushed it down in afternoon
trading more than 20 percent below its October 2007 peak, a
decline that Wall Street calls a bear market. The bear market
designation is not considered official unless there is a
market close at 20 percent below an index's most recent
closing high.
Selling gathered steam in afternoon trading after Moody's
Investors Service said it may cut the credit ratings of Morgan
Stanley <MS.N>.
Friday's decline followed a rout on Thursday that had the
Dow down 358 points.
"In this kind of a market, people are looking for any
reason to sell," said Chris Orndorff, managing principal and
head of equity strategy at Payden & Rygel. "It's the opposite
of a bull market when people take small positives and run
with it. Now people are taking small negatives and running for
the hills."
The Dow Jones industrial average <> tumbled 69.21
points, or 0.60 percent, to 11,384.21. The Standard & Poor's
500 Index <.SPX> dipped 1.08 points, or 0.08 percent, to
1,282.07. The Nasdaq Composite Index <> lost 5.64 points,
or 0.24 percent, to 2,315.73.
U.S. crude climbed to a record for a second straight day,
jumping as high as $142.99 a barrel and adding to concerns
about the toll of higher energy costs on consumers and the
outlook for earnings.
Analysts gave more gloomy predictions about the outlook
for banks, which have been reeling from the credit crisis.
Lehman Brothers predicted rival Merrill Lynch <MER.N> would
write down another $5.4 billion in the second quarter and
slashed its price target for the stock. For details, see
[].
Merrill shares slipped 0.8 percent to $32.79 while Morgan
Stanley shares were off 0.1 percent at $36.79.
Besides selling bank shares, investors also sold shares of
companies whose fortunes are closely tied to economic cycles
and are heavily energy reliant, including U.S. plane maker
Boeing <BA.N>, which fell 1.8 percent to $66.94.
Technology was not spared, with BlackBerry maker Research
In Motion Ltd <RIMM.O><RIM.TO> falling 2.6 percent to
$120.25.
Home builders' shares tumbled after KB Home <KBH.N>, the
No. 5 U.S. home builder, posted a wider-than-expected
quarterly loss. The stock fell 3.5 percent to $17.49 on the
NYSE.
(Additional reporting by Walker Simon and Ellis Mnyandu;
Editing by Jan Paschal)
