Dow Jones: 11,138.30 (-100.96) S&P 500: 1,165.24 (-8.73) Nasdaq: 2,473.83 (-6.50)WALL STREET fell for a third day on fears Europe still has failed to tackle its debt crisis, prompting worries the market is headed to new lows for the year.

Investors channelled cash into less risky assets as doubts resurfaced over the political will of Italy and Greece to push through tough budget measures and as Germany hardened its stand against providing more aid. The worries over the European debt crisis renewed fears that the global economy could fall into recession.

The S&P500 is now down 14.5 per cent from its highest point in 2011, reached at the end of April.

Though investors have periodically taken heart from signs that Europe has carved out a plan to deal with its festering crisis, confidence has been repeatedly walloped every time there is a development showing that the problems have not been solved.

“We have got a shot at trading the S&P under 1,100 again,” said Nick Kalivas, an equity index analyst at MF Global in Chicago. “I don’t sense that people are really going to defend the market until something like that occurs.”

A similar pattern of fractured confidence exists in bank stocks. Major US banks were among the biggest decliners, with the KBW Bank index off nearly 2 per cent.

Late on Friday, the Federal Housing Finance Agency sued 17 large US banks over subprime mortgage-backed bonds, compounding fears about the health of the sector.

The CBOE Volatility Index, or Vix, a measure of expected market turbulence, posted its biggest gain in nearly two weeks, climbing 9.4 per cent to 37.08.

“Right now there is a tremendous amount of uncertainty,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut. “There is a decent chance that we are in a bear market.”

Bank of America lost 3.6 per cent to $6.99 and JPMorgan Chase fell 3.4 per cent to $33.44.

Among gainers, Sunoco rose 5.3 per cent to $38.03 after the energy company said it plans to exit its refining business and focus on its logistics operations.

Packaging company Temple-Inland jumped 25 per cent to $30.85 after International Paper agreed to buy it for $32 per share. International Paper rose 8.9 per cent to $27.77. – (Reuters)