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U.S. stocks sank on Tuesday, sending the Dow Jones Industrial Average down by 200 points, as the rising tide of problems in the subprime mortgage market spurred fear of contagion across the whole financial sector, while weaker-than-expected retail sales confirmed a slowing economic outlook.
The market is gripped by "subprime contagion," said Peter Boockvar, equity strategist at Miller Tabak. "These are the same problems that have been weighing on the market for the last couple of weeks," he said, referring to the downtrend seen ever since the Dow fell 415 points exactly two weeks ago.
The market's downturn accelerated in the early afternoon after news that the number of homeowners unable to meet mortgage payments and entering the foreclosure process hit a record high in the fourth quarter.