US STOCKS-Stocks sink as Bear Stearns reignites credit fears

(Updates to close)

By Justin Grant

NEW YORK, March 14 (Reuters) - U.S. stocks tumbled on Friday as an emergency rescue of Bear Stearns orchestrated by the Federal Reserve revived fears about a deepening global credit crunch, triggering a massive sell-off in shares across the board.

Stocks plummeted after the New York Fed and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) stepped in with short-term financing for Bear Stearns Cos (BSC.N: Quote, Profile, Research, Stock Buzz)., the fifth-largest U.S. investment bank. Before the opening bell, Bear Stearns shocked Wall Street when it said its cash position had unraveled in the past 24 hours.

Bear Stearns stock sank as much as 50 percent before closing down 45.9 percent at $30.85. The Standard & Poor's financial index fell 4.1 percent as investors feared a massive unwinding of Bear Stearns investments could trigger a financial calamity.

"It's a crisis of confidence. Who would have ever thought that Bear Stearns would basically have a bank-type run on it when their balance sheet at one time was relatively healthy?" said Richard Steinberg, president and chief investment officer of Steinberg Global Asset Management Ltd. in Boca Raton, Florida.

Sentiment was further eroded as the U.S. dollar plunged to a record low against the euro and fell below 99 yen for the first time in 12-1/2 years, while the price of heating oil climbed to a record $3.68 a gallon.

Exposure to the escalating housing crisis prompted Moody's Investors Service to downgrade the debt of Washington Mutual (WM.N: Quote, Profile, Research, Stock Buzz) to one notch above junk status.

The Dow Jones industrial average .DJI dropped 194.65 points, or 1.60 percent, to end at 11,951.09. The Standard & Poor's 500 Index .SPX shed 27.34 points, or 2.08 percent, to 1,288.14. The Nasdaq Composite Index .IXIC slipped 51.12 points, or 2.26 percent, to 2,212.49.