US STOCKS-Wall St sinks as bank shares slide

                                
 * Bank of America reports increase in troubled loans
                                
 * Oracle offers to buy Sun Microsystems
                                
 * Dow off 3.6 pct, S&P off 4.3 pct, Nasdaq off 3.9 pct
                                
 * For up-to-the-minute market news click [STXNEWS/US]
 (Updates to close)
                                
 By Chuck Mikolajczak
                                
 NEW YORK, April 20 (Reuters) - U.S. stocks slid more than
3 percent on Monday after weak results from Bank of America
reignited concerns over the state of the banking industry and
the economy.
                                
 Wall Street's tumble was broad-based and follows a
six-week winning streak, the longest for the S&P 500 since
2007, with the Dow scoring its biggest gain over the period
since 1938.
                                
 Dow component Bank of America <BAC.N> shares plunged 24.3
percent to $8.02 despite reporting a rise in profits. Bank of
America's earnings report raised questions about the
sustainability of recent better-than-expected results from
banks after the company said its credit quality deteriorated
markedly . (For details see [ID:nN20380236]).
                                
 "We had started to believe that there was light at the end
of the credit crisis tunnel and a lot of the wind got taken
out of the sails," said Hugh Johnson, chief investment officer
of Johnson Illington Advisors in Albany, New York.
                                
 The Dow Jones industrial average <.DJI> dropped 289.60
points, or 3.56 percent, to 7,841.73. The Standard & Poor's
500 Index <.SPX> tumbled 37.21 points, or 4.28 percent, to
832.39. The Nasdaq Composite Index <.IXIC> fell 64.86 points,
or 3.88 percent, to 1,608.21.
                                
 After the closing bell, IBM <IBM.N> reported a
bigger-than-expected fall in quarterly sales, showing that
even one of the healthier U.S. technology companies was being
hurt by a slowdown in spending. [ID:nN20352411]
                                
 IBM's stock fell 3 percent to $97.47 in extended trade.
                                
 The sharp sell-off in the regular session was exacerbated
by comments from Bank of America Chief Executive Ken Lewis
that the already bad credit environment is getting
worse.
                                
 Energy and commodity shares also fell, with U.S. crude oil
futures ending nearly 9 percent lower amid pressure from
economic concerns and a rally in the U.S. dollar on safe-haven
bids. The S&P Energy Index <.GSPE> dropped 4.4 percent.
                                
 Adding to the bank worry, U.S. government officials have
determined they can avoid asking Congress for more bank
bailout funds by converting the existing loans to some U.S.
banks into common stock, the New York Times reported. Such a
move would dilute stockholders' stakes.
                                
 Shares of Citigroup Inc <C.N> lost 19.5 percent to $2.94
after Goldman Sachs analysts said credit losses at the bank
continued to grow at a rapid rate and estimated the bank's
underlying first-quarter loss was 38 cents a share.
[ID:nBNG445204].
                                
 The KBW bank index <.BKX> tumbled 15.4 percent.
                                
 Fueling more bank concerns were comments from J.P. Morgan
Securities, which said it estimates U.S. banks to incur $400
billion more in losses from the credit crisis and expects
there will be a need for more capital for certain
institutions. [ID:nBNG453139]
                                
 The U.S. Treasury also said on Monday that there was "no
basis" for a report that showed its "stress tests" on the
health of the nation's top 19 banks showed several were
"technically insolvent." [ID:nN20390864]
                                
 The major indexes suffered their worst performance on a
percentage basis since March 5. But the S&P 500 remains up 23
percent from the bear market closing low on March 9, with that
advance spurred by some positive comments from banks and hopes
that data signaled the economic slump may be moderating.
                                
 The Chicago Board Options Exchange Volatility index
<.VIX>, which measures the S&P 500's implied volatility and is
also known as the "fear gauge," jumped 15.4 percent, its
biggest one-day rise since Jan. 20.
                                
 Adding to the negative tone, U.S. President Barack Obama
said over the weekend the economy remains under strain and his
top economic adviser tempered hopes for a speedy recovery.
[ID:nN19340427].
                                
 On the merger front, Oracle Corp <ORCL.O>  said it would
buy Sun Microsystems Inc <JAVA.O> for about $7.4 billion after
Sun's talks with IBM <IBM.N> broke down earlier this month.
[ID:nN20381533].
                                
 Oracle shares shed 1.3 percent to $18.82, while Sun, the
high-end computer server and software maker, surged 37 percent
to $9.15.
                                
 Trading was active on the New York Stock Exchange, with
about 1.76 billion shares changing hands, above last year's
estimated daily average of 1.49 billion, while on Nasdaq,
about 3.07 billion shares traded,  well above last year's
daily average of 2.28 billion.
                                
 Declining stocks outnumbered advancing ones on the NYSE by
a ratio of more than 9 to 1, while on the Nasdaq, more than
five stocks fell for every one that rose.
 (Reporting by Chuck Mikolajczak; editing by Jan Paschal)