BEIJING, Oct. 22 -- The U.S. stock market had its worst week in two months on speculation the housing slump's toll on the economy is deepening, sending bank shares to their steepest decline since 2002.

    "Fear has definitely come back," said E. William Stone, who oversees 77 billion U.S. dollars as chief investment strategist at PNC Wealth Management in Philadelphia. "You can feel it. People are worried about the unknown in the financial stocks."

    Citigroup Inc, the largest US bank, fell to a four-year low after profit slid the most since 2004. Bank of America Corp, the second-largest US financial company, tumbled after saying it set aside 2.03 billion dollars for credit losses. Washington Mutual Inc, the biggest US savings and loan, slid to a five-year low after profit slumped.

    The Standard & Poor's 500 Index fell 3.9 percent to 1,500.63, halting a five-week streak of gains. The Dow Jones Industrial Average dropped 4.1 percent to 13,522.02. The Nasdaq Composite Index slid 2.9 percent to 2,725.16. All 24 industry groups in the S&P 500 lost last week.

    Third-quarter earnings from financial companies are headed for their biggest drop in at least a decade, data compiled by Bloomberg News showed. Members of the S&P 500 may post lower quarterly profits for the first time in five years, according to the average of analyst estimates compiled by Bloomberg.

    Earnings reports from Caterpillar Inc, Honeywell International Inc and Schlumberger Ltd have reinforced speculation that losses from mortgage defaults are slowing economic growth. The biggest rally in oil prices since March sent shares of companies dependent on consumer spending to the second-steepest loss among S&P 500 industries. Caterpillar dropped 8.4 percent to 73.57 dollars, Honeywell fell 3.5 percent to 58.32 dollars and Schlumberger lost 9.6 percent to 99.32 dollars.     

    Crude climbed to a record 89.47 dollars a barrel on Thursday. J.C. Penney Co and Nordstrom Inc, retailers that represent 15 percent of annual US department-store revenue, reported September sales that were lower than analysts estimated and reduced their profit forecasts.

    J.C. Penney fell 11 percent to 55.35 dollars. Nordstrom slid 12 percent to 38.59 dollars.

    Citigroup, the biggest US bank, said defaults will plague the financial industry for the rest of the year. Wells Fargo & Co, the second-largest US mortgage lender, and KeyCorp, Ohio's biggest bank, also reported earnings that fell short of analysts' estimates. Citigroup retreated 12 percent to 42.36 dollars.

    "You expected to see the financial institutions run into trouble," said Wayne Wilbanks, who oversees 1.3 billion dollars as chief investment officer of Wilbanks Smith & Thomas Asset Management LLC in Norfolk, Virginia. "We've got another six to nine months of skeletons coming out of the closet, which is what you're seeing clearly this quarter."

    A report showing US builders broke ground at an annual rate of 1.191 million homes, the lowest in 14 years, suggested the two-year housing recession deepened in September. D.R. Horton Inc, the second-largest US homebuilder, said orders fell 39 percent in the fiscal fourth quarter as banks restricted lending.

    (Source: Shanghai Daily)