* S&P 500 joins Dow and Nasdaq in bear market
* Cisco leads decline in tech shares on economy worries
* Freddie Mac, Fannie Mae post sharp losses again
(Updates to close)
By Kristina Cooke
NEW YORK, July 9 (Reuters) - U.S. stocks tumbled on
Wednesday, dragging the S&P 500 into a bear market, as worries
about more credit losses hurt financial companies and Cisco
Systems led technology shares lower after its CEO raised fears
of an extended economic downturn.
The S&P closed 20 percent below its all-time high set in
October, making it the last of the three major U.S. stock
indexes to fall into a bear market. Stocks have been roiled
for months by the credit crisis and a severe U.S. economic
slowdown.
In the latest news to scare the market, Cisco's <CSCO.O>
John Chambers told Reuters that customers of the company,
which makes Internet infrastructure, see the economy picking
up early in 2009 rather than later this year. At least two
brokerages also cut their price targets on the stock.
Fannie Mae <FNM.N> and Freddie Mac <FRE.N> dropped sharply
as some investors worried that the two pillars of the U.S.
housing market will need to raise billions of dollars in
additional capital through stock sales, diluting the holdings
of current investors.
Merrill Lynch <MER.N> shares fell more than 9 percent,
after Fitch Ratings said it may cut the U.S. investment bank's
debt rating, given expected ongoing write-downs and diminished
prospects for earnings.
"There is uncertainty about financials as we're going into
the earnings season about what write-offs and capital raising
might be needed," said Bucky Hellwig, senior vice president at
Morgan Asset Management, in Birmingham, Alabama.
"There is also concern that as the earnings reports come
out, that the projections for future performance for
technology may not be as strong due to the weakness in
economy."
All three major stock indexes fell more than 2 percent:
The Dow Jones industrial average <> shed 236.77 points, or
2.08 percent, to 11,147.44, while the Standard & Poor's 500
Index <.SPX> tumbled 29.01 points, or 2.28 percent, to
1,244.69. The Nasdaq Composite Index <> fell 59.55
points, or 2.60 percent, to close at 2,234.89.
On the Nasdaq, Cisco shares fell 5.7 percent to $21.58.
UBS said it expects enterprise spending to remain challenging.
Shares of other big technology companies also fell, with
chip-maker Intel <INTC.O> down 5.3 percent at $19.81.
IBM's <IBM.N> shares fell 2.8 percent to $120.40 and were
the top drag on the Dow.
Concerns about the economy also hit big manufacturers such
as General Electric <GE.N> and 3M Co <MMM.N>, both with losses
of more than 3 percent. GE shares fell 3.1 percent to $27.19
on the New York Stock Exchange, while shares of 3M dropped 3.4
percent to $68.64.
Even Alcoa Inc <AA.N> was unable to hold on to gains a day
after the aluminum producer posted second-quarter results that
beat analysts' estimates. Shares fell 2.4 percent to $31.54.
Freddie Mac shares slid 23.8 percent to $10.26 while
Fannie Mae lost 13.1 percent to $15.31.
The S&P financial sub-index <.GSPF> dropped 5.2 percent,
its biggest one-day decline in more than six years.
Merrill shares fell 9.3 percent to $29.74 and Bank of
America <BAC.N> stock lost 6.3 percent to $22.06.
Bank of America's chief executive said it may feel to some
people for the next year as if the economy is in recession.
Analysts are now expecting a 13.5 percent drop in
second-quarter earnings of S&P 500 companies, according to the
average estimate of analysts polled by Thomson Reuters. That's
compared to the 2 percent drop they were expecting in April.
Trading volume was moderate on the New York Stock
Exchange, with about 1.49 billion shares changing hands, below
last year's estimated daily average of roughly 1.90 billion,
while on Nasdaq, about 2.28 billion shares traded, above last
year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by about 2 to
1 on both the NYSE and the Nasdaq.
(Editing by Jan Paschal)
