A battered financial sector led Wall Street into bear market territory yesterday, as Bill Gross, manager of the bond fund Pimco, warned that a "tsunami" could ensue if the government failed to support markets.

Credit-card groups were among the key casualties as fears grew of rising defaults. American Express fell 5.3 per cent to $38.75 after Lehman Brothers forecast net charge-offs - a measure of uncollectable debts - on its cards would rise to 8.5 per cent of loans by next year.