Wall Street slides to 12-year low
Mon Feb 23, 2009 9:03pm EST
By Chuck Mikolajczak
NEW YORK (Reuters) - Wall Street slumped to a 12-year low on Monday as investors lost faith that the U.S. government will be able to stabilize the financial system.
The S&P 500 and the Dow both posted their lowest closes since the spring of 1997 as reports the government may convert its stake in Citigroup into a big common stock holding fell short of what many see as necessary to fix big banks.
"It is generally a market 'no' vote to what we're getting from Washington," said Hank Smith, chief investment officer at Haverford Trust Co in Philadelphia, of the reaction to the Citigroup news.
"It certainly doesn't inspire confidence when you do break multi-year lows, so it's just feeding into a real negative cycle that we're in right now," he said.
Adding to the bleak picture, CNBC reported that insurer American International Group could be forced into bankruptcy if new rescue talks with the government fail to secure it more funding.
The Dow Jones industrial average tumbled 250.73 points, or 3.40 percent, to 7,114.94. The Standard & Poor's 500 Index dropped 26.71 points, or 3.47 percent, to 743.34. The Nasdaq Composite Index skidded 53.51 points, or 3.71 percent, to 1,387.72.
In addition, worries about a decline in business and consumer spending on technology hurt the biggest names in the tech sector. IBM and Hewlett-Packard were the two of the biggest drags on the Dow industrials, with IBM shedding 5.0 percent to $84.37 and Hewlett-Packard sliding 6.3 percent to $29.28 a share.
The market capitalization of the Dow fell $77.1 billion on Monday. The index is down nearly 50 percent from its record high close in October 2007, with about $10 trillion of value in wiped out since then.
So far this year, the Dow has fallen 18.9 percent while the S&P 500 has shed 17.7 percent and the Nasdaq has dropped 12 percent.
The blue-chip index is down nearly 50 percent from its record close in October 2007.
Fears that some major U.S. banks could be nationalized continued to drag on sentiment on Monday, as stocks briefly came off lows after the White House reiterated that a privately held banking system regulated by the government was still the best way to operate.
As the only boosts to the Dow, Citigroup and Bank of America were up 9.7 percent and 3.2 percent, respectively, after having fallen more than 35 percent each on Friday.
Helping to fuel the tech slide was a Morgan Stanley downgrade of its PC sales forecasts for 2009 and 2010, citing lower prices and weaker-than-expected demand for PCs given the rising sales of netbooks, which are cheaper, no-frills notebook computers.
Apple Inc, down nearly 5 percent to $86.95, was the primary drag on Nasdaq.
After the closing bell, JP Morgan announced it will slash its quarterly dividend to 5 cents a share from 38 cents, saying that will enable it to retain an additional $5 billion in common equity per year. Shares rose 1 percent to $19.70 in extended trade. Continued...