Stocks on Wall Street fell sharply from the opening bell led by financials after shares in US banking giant Bank of America were temporarily suspended.
Shares in Bank of America fell 8 per cent at the open and were suspended pending an announcement causing mounting tension throughout the morning.
Speculation swirled today that one California's largest utilities had drawn down a line of credit at Bank of America, the parent of the country's largest and that the bank had large losses in derivatives trading.
But the company issued a statement saying "We know of no basis to support speculative rumors about our operations... The company has not experienced any significant losses in derivatives or other trading activities."
The company added it remains comfortable with its guidance for credit quality in 2001 as provided to investors last month. US Financial stocks were still weak, with Citigroup and JP Morgan Chase both lower in heavy trading.
Last night's surprise decision by the Fed to cut the discount lending rate to US banks has raised concerns that the banking system was under strain.
The Dow Jones industrial average dropped 115.80 points, or 1.06 per cent, to 10,796.61. The broader Standard & Poor's 500 Index dipped 11.50 points, or 0.86 percent, to 1,321.84.
Additional reporting by Reuters