U.S. stocks fell, sending the Standard & Poor's 500 Index below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.

Bank of America Corp. tumbled 26 percent after cutting its dividend in half and saying it plans to sell $10 billion in common stock to brace for a recession. Morgan Stanley, KeyCorp and JPMorgan Chase & Co. slid at least 10 percent as investors shrugged off signs the Federal Reserve will cut interest rates. General Growth Properties Inc., a Chicago-based mall owner, plunged 42 percent on concern it won't be able to repay debt.

The Standard & Poor's 500 Index slid 60.64 points, or 5.7 percent, to 996.25. The Dow Jones Industrial Average dropped 508.39, or 5.1 percent, to 9,447.11. The Nasdaq Composite Index lost 4.3 percent to 1,862.96. Fourteen stocks fell for each that rose on the New York Stock Exchange.

''Capital markets are very tight right now,'' said Douglas Christopher, a partner at Crowell Weeden & Co. in Los Angeles, a regional brokerage firm with $10 billion under management. ''Companies that need external financing or are perceived to need external financing are going to be given a discount in the current environment.''

The S&P 500 extended its 2008 decline to 32 percent, while the Dow's yearly loss widened to 29 percent in the market's worst yearly retreat since 1937. The S&P 500 Financials Index slumped 12 percent to below its lowest level since 1997 even after Fed Chairman Ben S. Bernanke signaled he is ready to cut interest rates.

Levkovich Cuts Forecast

The slump that pushed the S&P 500 to an almost five-year low yesterday prompted Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc., to lower his year-end forecast for the index by 19 percent to 1,200. His previous target of 1,475 had been the most bullish of nine forecasts in a Bloomberg survey.

Bank of America plunged $8.45 to $23.77 after the lender slashed its dividend to 32 cents and announced plans to raise at least $10 billion in common stock as it braces for an extended recession. Chief Executive Officer Kenneth Lewis said the U.S. economy slowed in the past 45 days with little prospect for immediate improvement.

The bank also released its third-quarter earnings two weeks early. Profit declined 68 percent to $1.18 billion, or 15 cents a share. Analysts predicted earnings of 61 cents a share for the quarter, according to the average of 20 estimates compiled by Bloomberg.

'Credit Deterioration'

''The market is responding to the fact that there was credit deterioration in their businesses,'' Erick Maronak, the New York-based chief investment officer at Victory Capital Management, said of Bank of America. Victory Capital oversees $66 billion.