Late Selloff Whips Wall Street

Updated from 4:11 p.m. EST

Stocks were hammered late Tuesday as troublesome comments from telecom giant AT&T (T Quote) compounded early weakness brought on by worries in the financial sector and disappointing housing data.

The Dow Jones Industrial Average see-sawed for most of the session, but plunged in the final hour on news of negative remarks from AT&T's CEO at an investor conference. The index sank 238.42 points, or 1.86%, to 12,589.07.

The S&P 500 dropped 25.99 points, or 1.84%, to 1390.19. The Nasdaq Composite plummeted 58.95 points, or 2.36%, to 2440.51, giving the tech-heavy index its eighth straight losing session.

The late decline came after a Bloomberg report that AT&T CEO Randall Stephenson said the company faces softness in its consumer business. Shares of the phone giant tumbled 4.9%. Rival Verizon (VZ Quote) slumped 2.7%, and Sprint Nextel (S Quote) fell 3.3% in sympathy.

"The market was in a fragile position and cracked under all the bad news," said Phillip Roth, chief technical market analyst with Miller Tabak. "It is a bear market, and it's more likely to react to negative news than positive news. Even though we're approaching oversold conditions, there are no indications that the selling is over."

Marc Pado, U.S. market strategist with Cantor Fitzgerald, said that traders will now have to hope for another Federal Reserve rate cut before the market will move higher.