Advertisement

Dow drops below 7,000 for first time since 1997

March 02, 2009

NEW YORK (AP) -- Investors turned cautious again Monday as a staggering $61.7 billion in quarterly losses at insurer American International Group Inc. touched off fresh worries about the health of the nation's financial system.

The Dow Jones industrial average fell below 7,000 for the first time in more than 11 years as investors grew pessimistic about the health of banks, and in turn the economy. The blue chips hadn't traded below 7,000 since Oct. 28, 1997, and last closed below that mark on May 1 of that year.

The credit crisis and recession have now slashed half the average's value since it hit a record high over 14,000 in October 2007.

Investors are fleeing financials after the government said it would give AIG another $30 billion in loans, besides the $150 billion it has already given the company.

Advertisement

Investors are worried about European financial companies, too. HSBC PLC, Europe's largest bank by market value, reported a 70 percent drop in 2008 profit and said it needs to raise $17.7 billion and cut 6,100 jobs.

"As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.

The "game-changer," he said, will be the housing market and whether it can stabilize.

In midmorning trading, the Dow fell 153.96, or 2.18 percent, to 6,908.97.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 17.18, or 2.34 percent, to 717.91, and the Nasdaq composite index fell 23.42, or 1.70 percent, to 1,354.42.

Mixed economic readings on Monday weren't enough to prop up stocks.

Personal spending rose 0.6 percent in January and incomes rose 0.4 percent, while construction spending fell 3.3 percent, more than twice as much as economists expected. Manufacturing contracted in February for the 13th straight month, but at a slower pace than expected.

Meanwhile, billionaire investor Warren Buffett wrote in his annual letter to investors Saturday he is sure "the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall."

The Herald-Mail Articles
|
|
|