Traders work on the floor of the New York Stock Exchange in New York Jan. 8, 2008. U.S. stocks fell, erasing an earlier rally, as shares of mortgage-related companies dropped sharply with traders citing rumors of more financial problems at Countrywide Financial Corp, the largest U.S. mortgage lender. (Xinhua/Reuters Photo) Photo Gallery>>>

    NEW YORK, Jan. 8 (Xinhua) -- Wall Street plummeted Tuesday amid rumors about Countrywide's possible bankruptcy.

    Many traders have been betting recently that Countrywide might need to file for bankruptcy. Countrywide denied that rumor Tuesday, but its stock still plunged 28 percent. The New York Times reported that Countrywide Financial Corp. had fabricated documents, spelling further trouble for the country's biggest home loan provider.

    The U.S. National Association of Realtors posted its pending U.S. home sales index Tuesday, which fell 2.6 percent in November,more than the market expected.

    Although hopes remain high that the Federal Reserve will continue its campaign of rate cuts to prevent an economic recession, negative news on the day still dropped stocks down.

    The Dow Jones industrial average fell 238.42 points, or 1.86 percent, to 12,589.07. Broader stock indicators also sank. The Standard & Poor's 500 index dropped 25.99 points, or 1.84 percent, to 1,390.19, and the Nasdaq composite index