AP) Stocks plunged Tuesday, driving the Dow Jones industrials down more than 240 points in their second-biggest drop of the year as troubles piled up for subprime lenders.

Investors, bracing for a wilting economy, fled the already deflated subprime mortgage sector while problems increased for lenders such as New Century Financial Corp., Accredited Home Lenders Holding Co. and General Motors Acceptance Corp.’s residential unit. Bolstering the belief that the problems are widespread, the Mortgage Bankers Association reported that new foreclosures surged to an all-time high in the last quarter of 2006.

The subprime lending worries, coupled with anxiety over the Commerce Department’s report Tuesday that U.S. retailers eked out a meager 0.1 percent rise in sales last month, knocked down all three major stock indexes about 2 percent.

“The market’s still jittery, and they’re starting to get full-blown concerns over a bleed in the larger subprime mortgage market,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

The subprime market is a relatively small sector of the U.S. economy, Kelmon noted. But Tuesday’s selling was accentuated by options expiring soon and by volatility that has increased since the market’s big plunge two weeks ago - a 416-point drop in the Dow that was caused partially by the problems of subprime lenders, who loan to people with poor credit.

The Dow fell 242.66, or 1.97 percent, to 12,075.96. The index is now down more than 710 points, or 5 percent, from its record close reached Feb. 20.

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