U.S. Stocks Drop as SEC Sues Goldman Sachs for Fraud on CDOs

U.S. stocks tumbled the most since February as Securities and Exchange Commission fraud accusations against Goldman Sachs Group Inc. spurred concern the fallout from the financial crisis isn’t over.

Goldman Sachs sank as much as 16 percent, the most in 15 months, after the SEC sued the company and one of its vice presidents for misstating and omitting key facts about a collateralized debt obligation. JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley sank at least 3.3 percent as all 27 shares in a gauge of banks and brokerages retreated. Google Inc. plunged 6.5 percent after its earnings trailed some analyst estimates.

he Standard & Poor’s 500 Index fell 1.8 percent to 1,189.80 at 12:33 p.m. in New York and retreated 1.9 percent earlier, the most intraday since Feb. 4. The Dow Jones Industrial Average declined 145.10 points, or 1.3 percent, to 10,999.47. Both slipped from their highest levels since September 2008, the month Lehman Brothers Holdings Inc.’s bankruptcy intensified the credit crisis.

“People are watching to see what the fallout is going to be,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York, who doesn’t own Goldman Sachs shares. “There are uncertainties if other institutions are involved. Only time will tell if that could have a larger effect on the economy. We don’t know that yet.”