INSTANT VIEW: S&P now latest global benchmark in bear market

NEW YORK (Reuters) - The Standard & Poor's 500 index .SPX, the most widely tracked U.S. equity benchmark, dropped into a confirmed bear market on Wednesday on worry about deeper credit losses across the financial sector and a weakening economic outlook.

KEY POINTS: * The S&P 500 is now 20.5 percent below its record high close of 1,565.15, set October 9, 2007. Bear markets are typically defined by an index drop of 20 percent or more from a peak level. * The index is the last of the three major U.S. benchmarks to confirm its bear market status. The Dow Jones industrial average .DJI crossed the bear threshold on July 2, and the Nasdaq composite index .IXIC did so on February 6. * Financial stocks once again proved the catalyst for the downdraft that carried the S&P into bear territory. The S&P financials index .GSPF is off 33 percent year to date and nearly 50 percent from its 2007 record high. * The S&P financials index fell 5.2 percent on the day, the biggest one-day percentage drop in six years. Wednesday's fall was led by mortgage funding providers Fannie Mae (FNM.N) and Freddie Mac (FRE.N), on renewed anxiety about the potential need for a massive capital infusion. * Stubbornly high oil prices are also cited widely as a factor by market participants. While crude has fallen more than $9 a barrel this week, the oil price remains above $135 a barrel and has driven retail gasoline prices to records this year. That is pushing up fears of quickening inflation and slowing consumer spending. * After financials, the next worst performing sector in the decline has been consumer discretionaries, where General Motors (GM.N) has led the charge lower, dropping 58.5 percent year to date.

COMMENTS:

SUNG WON SOHN, MARTIN V. SMITH PROFESSOR OF ECONOMICS AT CALIFORNIA STATE UNIVERSITY, CAMARILLO, CALIFORNIA:

"I think we are going to have to grin and bear it for a while because the market is getting worse, not better. I think the primary culprit at the moment is the high price of oil which amounts to a massive tax on the economy including you and me. So with the heavy tax burden on our shoulders the economy cannot operate very well."

"I think we will see at least one quarter of economic contraction of real gross domestic product in the second half of this year. We are in for some more pain in the coming months."

"What the financials have to do is go through a process of deleveraging. Leveraging during good times was easy. Deleveraging during tough times is very tough. We are seeing many financial firms not able to raise capital and not able to sell assets they have acquired. I suspect we will see more and more commercial banks getting in trouble as well."

JORDAN KOTICK, GLOBAL HEAD OF TECHNICAL ANALYSIS, BARCLAYS CAPITAL, NEW YORK:

"It's significant (the S&P falling into a bear market). It is not just the S&P. It's global and that's the danger."