By Kristina Cooke
NEW YORK (Reuters) - Stocks fell sharply on Monday, as shares of financials fell on concerns they may have to raise more capital and as a retreat in the price of oil from record highs weighed on energy shares.
All three major U.S. stock indexes were down about 1 percent, with the S&P 500 trading in bear market territory. To confirm a bear market the benchmark index would have to close down 20 percent from its October closing highs.
Concerns Fannie Mae
Adding to capital-raising concerns, San Francisco Federal Reserve President Janet Yellen said in a speech it was important that more capital flow into the financial sector, including money from private equity sources.
"There's all this talk about capital raising; that's going to feed on itself and it seems like it's never ending. Whenever you think it's done someone else comes out and says they think financials have to raise more and that's obviously going to dilute their share price," said Neil Massa, senior U.S. trader at MFC Global Investment Management in Boston.
Exxon Mobil and other big energy companies fell as U.S. crude oil dropped more than $4 to $142.07 a barrel after the dollar touched a 1-1/2-week high against other major currencies. Oil hit a record of $145.85 last week.
The Dow Jones industrial average <.DJI> was down 112.68 points, or 1.00 percent, at 11,175.86. The Standard & Poor's 500 Index <.SPX> was down 17.63 points, or 1.40 percent, at 1,245.27. The Nasdaq Composite Index <.IXIC> was down 19.91 points, or 0.89 percent, at 2,225.47.
If the S&P 500 closes below 1,252.12, it would join the Dow and the Nasdaq in a bear market.
Concern that Freddie Mac could see greater losses from mortgage insurance was fueled on Monday after research firm CreditSights said mortgage insurer Radian
A Freddie Mac spokeswoman said the company does not intend to raise capital until it announces second-quarter earnings, and declined to comment on its ability to raise capital as shares fall.
SunTrust Banks Inc
An S&P index of financial shares <.GSPF> was down 4.4 percent, with most of the sub-index's components in the red. JPMorgan Chase
A nearly 12 percent jump in Yahoo's stock on hopes for new talks with Microsoft Corp stirred enthusiasm for technology shares but was not enough to keep an early rally on track.
Teva Pharmaceutical Industries Ltd
With the drop in oil, an S&P index of energy shares <.GSPE> was down 2.7 percent. Exxon Mobil
In economic news, the Conference Board said there is little reason to expect the U.S. labor market to recover soon after the group's Employment Trends Index fell in June.
(Editing by James Dalgleish)