Stocks Drop on Bank Worries, FedEx Profit Warning

Wall Street took a tumble today on renewed concerns about the financial sector and FedEx Corp.'s warning that weakening demand and surging fuel costs would weigh on profits in the coming year.

The Dow Jones industrial average finished down more than 130 points, after briefly dipping below the 12,000 mark for the first time since mid-March. All three major stock indexes finished down about 1%, as oil and bond prices jumped.

Unease about financials arose after several worrisome developments. Fifth Third Bancorp said it plans to cut its dividend by nearly two-thirds, raise $1 billion through an offering of preferred stock and generate another $1 billion through the sale of businesses.

MF Global Ltd. predicted that tight credit spreads will weigh on its fiscal first-quarter earnings. The futures and options broker said it plans to sell $300 million in convertible securities to help pay down a loan due this year.

And although Morgan Stanley reported a slightly better-than-expected fiscal second-quarter profit, earnings at the nation's second-largest investment bank were still down 61% from a year earlier on declining revenue.

Earlier, FedEx forecast that earnings for the fiscal year that began this month will fall well short of what Wall Street had been expecting. The shipper's prediction serves as the latest sign that oil prices, which have nearly doubled in the past year, are exacting a burdensome tax on businesses and consumers alike.

"I think the news out of FedEx today really is starting to make people second guess some of the optimism that had been brewing over the last few weeks," a market strategist at Jefferies & Co. in New York, Craig Peckham, said.

According to preliminary calculations, the Dow fell 131.24, or 1.08%, to 12,029.06. The index briefly fell below 12,000 before recovering. The index hadn't traded below the 12,000 mark since March 18 and last closed below that level on March 17.

The Dow's decline follows its loss of more than 100 points yesterday.

Broader stock indicators also pulled back today. The Standard & Poor's 500 index fell 13.12, or 0.97%, to 1,337.81, and the Nasdaq composite index fell 28.02, or 1.14%, to 2,429.71.