US stocks fell to an 18-month low, led by banks, after home foreclosures climbed to a record and loan defaults by Thornburg Mortgage Inc. and a Carlyle Group bond fund spurred concern that credit losses are deepening.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. led financial shares to the lowest level since May 2003.

Retailers J.C. Penney Co. and Gap Inc. fell on sales that trailed estimates. The Standard & Poor’s 500 Index lost 10 points in the final half hour of trading as investors speculated today’s US employment report will show the economy has tipped closer to recession.

The S&P 500 tumbled 29.36 points, or 2.2 percent, to 1,304.34, the lowest closing level since September 2006.

The Dow Jones industrial average lost 214.60, or 1.8 percent, to 12,040.39. The Nasdaq composite decreased 52.31, or 2.3 percent, to 2,220.50. More than 11 stocks fell for every one that rose on the New York Stock Exchange.

Financial stocks dropped for a sixth day, the longest losing streak since November.