Wall St tumbles after S&P threatens GE, oil falls

By Chuck Mikolajczak

NEW YORK (Reuters) - Stocks fell for the second day on Thursday after Standard & Poor's threatened to strip General Electric of its 'AAA' credit rating and slumping oil prices crippled energy shares.

General Electric (GE.N) shares tumbled 8.2 percent to $15.96 and ranked among the top drags on the Dow industrials after S&P said there is at least a 1-in-3 chance that it will cut the company's credit rating from the top "AAA" tier in the next two years.

"It's certainly not good news for GE and their ability to borrow," said Michael Cuggino, president and portfolio manager at Permanent Portfolio Funds in San Francisco. "It just supports the broad-based economic decline."

Chevron Corp (CVX.N) and Exxon Mobil (XOM.N) were the biggest drags on the Dow for the second consecutive session as oil fell almost $4, or about 10 percent, to settle near $36 a barrel on growing fears of falling demand.

The Dow Jones industrial average .DJI tumbled 219.35 points, or 2.49 percent, to end at 8,604.99. The Standard & Poor's 500 Index .SPX dropped 19.14 points, or 2.12 percent, to 885.28. The Nasdaq Composite Index .IXIC fell 26.94 points, or 1.71 percent, to 1,552.37.

The Nasdaq showed the ill effects of a downgrade by brokerage Jefferies & Co of Intel Corp (INTC.O) and other semiconductor stocks. [ID:nBNG374800] The Philadelphia Semiconductor Index .SOXX tumbled 5.5 percent.

ORACLE JUMPS LATE

After the close, business software maker Oracle (ORCL.O) and BlackBerry maker Research in Motion (RIM.TO)(RIMM.O) reported quarterly earnings, which could help lift the Nasdaq in Friday's trading.

Shares of Oracle shot up 2.6 percent to $17.05 in extended trade, while Research in Motion's U.S.-listed stock was down slightly.

The broad S&P 500 gave up just under half of the big gain it racked up following the Federal Reserve's surprisingly aggressive interest-rate cut on Tuesday.

The two days of declines put a damper on the market's attempt to establish a sustainable rally off the recent lows, but it remains up about 19 percent from its then 11-year intraday low that it hit on November 21. The S&P 500 remains down about 40 percent for the year so far.

Investors continue to assess the benefit of the Fed's record rate cut on Tuesday and a proposed stimulus package from President-elect Barack Obama.

An S&P index of energy stocks .GSPE lost 5.7 percent. Chevron was down 4.9 percent at $73.03, while Exxon Mobil was down 5 percent at $77, both on the New York Stock Exchange.

Oil prices tumbled despite OPEC's approval of a record output cut on Wednesday. U.S. crude for January delivery fell $3.84 to settle at $36.22 a barrel.

WHEN THE CHIPS ARE DOWN