Markets Mauled

Markets fell hard and wide Tuesday, as a combination of bad news and low volume reminded Wall Street of the uncertainty plaguing investors, despite the relative stability of the past few days.

While dropping throughout the day, the Dow Jones industrial average took an especially steep dive in the last hour of trading to close down 2.1%, or 280.28 points, to 13,041.85, with the Nasdaq Composite Index finishing down 2.4%, or 60.61 points, to 2,500.64, and the Standard & Poor’s 500 Index falling 2.4%, or 34.43 points, to 1,432.36.

All in all, it's the kind of day that might make adherents to the Goldilocks scenario--that the markets are "just right"--reconsider their belief in fairy tales.

“There was more bad news than good news,” said Jefferies analyst Art Hogan, in an understatement, adding that investors were reminded they’re not out of the woods yet.

Financials led the way after Merrill Lynch (nyse: MER - news - people ) published a report downgrading Bear Stearns (nyse: BSC - news - people ), Lehman Brothers (nyse: LEH - news - people ), and Citigroup (nyse: C - news - people ).

Hogan also noted Wall Street was also shaken by reports surrounding Barclays (nyse: BCS - news - people )’ exposure to credit issues (See "Barclays Sinks On Sachsen Worries").

Wall Street also extended its retreat on Tuesday as investors cautiously awaited minutes from the Federal Reserve's last meeting, hoping it would provide insight into whether it may cut rates.

Analysts said there was little news to send prices sharply lower. But the market's overall difficult mood since the turbulence of earlier in August, coupled with light volume, helped skew price swings—especially ahead of the Fed report.

Hogan argued the news was coupled with the Tuesday’s announcement from the Conference Board that its Consumer Confidence index slipped to 105.0 in August from 11.9 in July, spurred by falling home prices (See “Housing Hits Consumer Confidence”)

Economists expected a reading of 104.5.

Although the index dropped, Birinyi Associates research analyst Cleveland Rueckert argued instead that because the result beat expectations, he does not believe the announcement had too much of an influence on Tuesday’s movement.

“We haven’t had this kind of day in a while,” Hogan said. “And it’s not surprising with a low volume day in the summer.”

Rueckert looks to mid-September, when financial companies begin to release their quarterly earnings report, and “Wall Street gets a better idea of what’s going on and who is exposed to what.”

As previously noted, the Financial sector was hit hard as Lehman Brothers fell 6.0%, or $3.47, to $54.28, Bear Stearns dropped 3.4%, or $3.37, to $108.42, and Citigroup lowered 3.5%, or $1.65, to $46.14.

In the energy sector, Exxon Mobil (nyse: XOM - news - people ) fell 2.5%, or $2.12, to $83.00 and Chevron (nyse: CVX - news - people ) dropped 3.1%, or $2.70, to $84.30.

The industrials and materials sector also dropped, as Boeing (nyse: BA - news - people ) lowered 2.9%, or $2.89, to $95.65, Caterpillar (nyse: CAT - news - people ) dropped 2.4%, or $1.79, and $74.21, and Lockheed Martin (nyse: LMT - news - people ) tumbled 4.5%, or $4.62, to $97.79.