Investors are back to worrying about banks, shaving nearly 300 points off the Dow Jones industrial average on Monday.
The Dow fell 289.60, or 3.6 percent, to 7,841.73 at market close. The Standard & Poor's 500 index fell 37.20, or 4.3 percent, to 832.40, and the Nasdaq composite index fell 64.86, or 3.9 percent, to 1,608.21.
Traders had been looking for some pullback after the Dow jumped 24 percent from 12-year lows in early March, led largely by a recovery in banking stocks.
That didn't happen.
Bank of America plunged 24.3 percent and Citigroup fell 19 percent as investors became worried that cleaning up bad loans from banks' balance sheets may have farther to go than many had anticipated.
Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said traders are now viewing bank earnings with more skepticism and believe that the better-than-expected profit reports may be disguising problems.
"They're looking at bank numbers and are saying they are not that great," Saluzzi said.
The renewed worries about banks's stability were aggravated by news reports that their lending remains tight and that the government may swap its debt in banks for ownership stakes as its $700 billion bailout fund runs down.
Such a move would give the government a controlling stake in banks and hurt existing shareholders by reducing the value of their shares.
Because of the central role lending plays in keeping businesses of all kinds going, investors have been hunting for signs of a recovery in banks before they get more optimistic about the broader economy.
The market has been encouraged by early indications that a government drive for lower interest rates has been helping banks step up lending, but investors are still sensitive to any signs of trouble. Now they're on high alert about what the government will say in two weeks when it reports results of in-depth "stress tests" to see which banks might need more help to stay afloat if the economy gets even worse.
Energy and materials companies also fell along with the prices of key commodities they rely on such as crude oil.
About 10 stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.8 billion shares.
The market declines were broad and deep, outweighing what would otherwise be positive news about a step-up in deal activity. After a deal with IBM Corp. didn't work out, troubled technology company Sun Microsystems found a buyer in Oracle, a leading maker of business software, while PepsiCo Inc. said it would bid $6 billion to buy its two biggest bottlers.
Overseas, Japan's Nikkei stock average rose 0.19 percent. Britain's FTSE 100 fell 2.5 percent, Germany's DAX index fell 4.1 percent, and France's CAC-40 fell 4 percent.