By Alejandro Lazo
Washington Post Staff Writer
Saturday, June 28, 2008

A week of spiraling oil prices, pessimistic corporate news and renewed fears over the direction of the national economy ended yesterday with U.S. stocks again slipping after the dramatic fall of a day earlier.

The Dow Jones industrial average has now dropped nearly 20 percent since its high in October. A 20 percent decline is traditionally the definition of a bear market.

The events of the past five days -- the last full week of trading for the second quarter, which ends Monday -- resulted in stocks in a wide array of industries, from automotive to financial to technology, taking a beating. With American consumers still feeling the shock of high oil prices and declining home values, and additional write-downs feared for large financial institutions, Wall Street traders warned that little improvement in investor sentiment appeared likely soon.

"There have been rumors of more write-downs in financials, oil is above $140, and so investors are selling before the end of the quarter," said Jim Herrick, director of equity trading at Robert W. Baird. "I think the market doesn't like uncertainty, and right now we have got a lot of uncertainty: We have earnings coming up in July, the continued high price of oil, concerns about inflation, stagflation, and so there are still a lot of concerns, and the market is pricing in those concerns."

The blue-chip Dow yesterday fell 106.91 points, or 0.93 percent, to 11,346.51. Taken together with its 3 percent decline Thursday, the Dow fell 465 points over the two days.

Broader stock measures also fell yesterday. The Standard & Poor's 500-stock index fell 4.77, or 0.37 percent, to 1278.38. The tech-heavy Nasdaq dropped 5.74, or 0.25 percent, to 2315.63.

The financial sector got more bad news yesterday with Moody's Investors Service warning that it might downgrade its credit rating of Morgan Stanley. Analysts at large institutions also continued to take aim at one another yesterday. A Lehman Brothers analyst warned that Merrill Lynch is likely to take more write-downs this quarter.

"It sure feels like a bear market, and if you are in financials, it is worse than that. Financials have just really been taken apart, and it has been a difficult week for investors," said Andrew Brooks, head of stock trading at T. Rowe Price. "It is almost as if people have decided the second half of the year is not going to be better, whereas before, the light at the end of the tunnel was more visible. People are concerned that it is going to take longer."

The week began with the price of oil continuing its ascent as commodities traders shrugged off a meeting convened by Saudis last weekend in Jidda, Saudi Arabia, where that nation pledged to increase its oil output by 200,000 barrels a day. The price of crude oil climbed through the week, with light crude oil for August delivery closing yesterday at $140.21 on the New York Mercantile Exchange, another record high.

In recent months, the Federal Reserve has tempered declines in the stock market by lowering interest rates, which tends to stimulate economic activity. But this week, the central bank's policymaking committee signaled that it was growing increasingly concerned about inflation and voted to leave its key interest rate unchanged.

For the week, the Dow was down 496 points, or 4.19 percent. The S&P finished the week off 39.55, or 3 percent, while the Nasdaq was down 90.46, or 3.76 percent.

Bank of America fell 22 cents, to $24.59.

Anheuser-Busch rose 91 cents, to $62.26.

Palm fell 54 cents, to $6.