Late selling smacks down U.S. stocks; Dow loses 387

NEW YORK -- U.S. stocks tumbled Thursday after BNP Paribas, a large French bank, said it would stop calculating net asset values for three of its hedge funds that have invested in the U.S. subprime mortgage market.

The Dow Jones industrial average fell 387.18 points, or 2.8%, to 13,270.68. The Standard & Poor's 500 Index closed down 44.40 points, or 3%, at 1453.09. The Nasdaq composite index lost 56.49 points, or 2.2%, to 2556.49.

Thursday's pullback continued an erratic pattern of triple-digit moves in the Dow since the index closed at a record 14,001.41 on July 19. Eleven of the 15 ensuing sessions have ended in a triple-digit gain or loss. Gains have been evaporating at the first mention of trouble in housing, subprime lending or the credit markets.

With Thursday's decline, the Dow is about 730 points, or 5.2%, below its record close. Some experts have been calling for a textbook correction — a pullback of at least 10%. At its lowest close since the market's high, Friday's finish of 13,181.91, the Dow was 5.85% below the record.

Before Thursday, the S&P had its best three-day winning streak in nearly five years. But the latest pullback was the biggest point drop and percentage loss for both the Dow and the S&P since a market decline on Feb. 27.

Despite Thursday's slide, the major market indexes are still up for the week, given that stocks rose sharply the first three sessions of the week.

Bonds rose sharply as investors again sought the relative safety of Treasurys, pushing down the yield on the benchmark 10-year note to 4.79% from 4.89% late Wednesday.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.76 billion shares compared with 5.3 billion shares traded Wednesday.

The Chicago Board Options Exchange's volatility index, often called the "fear index," rose Thursday to its highest level since April 2003.

The announcement by BNP Paribas raised the specter of a widening impact of U.S. credit market problems. The idea that anyone — institutions, investors, companies, individuals — can't get money when they need it unnerved a stock market that has suffered through weeks of volatility triggered by concerns about tight credit and bad subprime mortgages.