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2009-02-24 09:36:25
By TIM PARADIS, AP Business Writer Tim Paradis, Ap Business Writer Mon Feb
23, 10:52 pm ET
NEW YORK Wall Street has turned the clock back to 1997. Investors unable to
extinguish their worries about a recession that has no end in sight dumped
stocks again Monday.
The Dow Jones industrial average tumbled 251 points to its lowest close since
May 7, 1997, while the Standard & Poor's 500 index logged its lowest finish
since April 11, 1997. It's as if the decade's dot-com surge, collapse and
subsequent recovery never occurred.
The Dow is just over 100 points from 7,000. Both indexes have lost about half
their value since hitting record highs in October 2007.
"People left and right are throwing in the towel," said Keith Springer,
president of Capital Financial Advisory Services.
Investors pounded most financial stocks even as government agencies led by the
Treasury Department said they would launch a revamped bank rescue program this
week. The plan includes the option of increasing government ownership in
financial institutions without having to pour more taxpayer money into them.
Although the government has said it doesn't want to nationalize banks, many
investors are clearly still concerned that this could be a possibility as banks
continue to suffer severe losses because of the recession. They're also worried
that banks' losses will keep escalating as the recession sends more borrowers
into default.
"The biggest thing I see here is the incredible pessimism," Springer said. "The
government is doing a lousy job of alleviating fears."
The Treasury and other agencies issued a statement after The Wall Street
Journal reported Citigroup is in talks for the government to boost its stake in
the bank to as much as 40 percent. Analysts said the market, which initially
rose on the statement, wanted more details of the government's plans.
"It's only a very partial picture of what we may get," said Quincy Krosby,
chief investment strategist at The Hartford. "This proverbial lack of clarity
is damaging market psychology."
Meanwhile, technology stocks fell after The Journal reported that Yahoo Inc.'s
new chief executive plans to reorganize the company. But the selling came
across the market as pessimism about the recession and its toll on companies
deepened.
"There's no where to hide anymore," said Jim Herrick, director of equity
trading at Baird & Co.
The market's decline extends massive losses from last week when the major stock
indexes tumbled more than 6 percent. While falling to their 1997 levels, the
major indexes plunged through the lows they reached in late November, at the
height of the credit crisis.
"There's no main driver of the down day," said Ryan Detrick, senior technical
strategist at Schaeffer's Investment Research. "There's just so much skepticism
in the overall market and (the question is) is the government doing proper
things to get us out of this problem. Obviously the stock market is voting no."
The Dow dropped 250.89, or 3.41 percent, to 7,114.78. It last closed this low
on May 7, 1997 when it finished at 7,085.65. The Dow hasn't traded below the
7,000 mark since October 1997. The index is down 14 percent over the past 10
sessions.
The Standard & Poor's 500 index fell 26.72, or 3.47 percent, to 743.33. It was
the lowest close since April 11, 1997, when it ended at 737.65.
When the indexes were last at these levels, they were in their ascendancy,
climbing amid the dot-com boom. But 1997 was also the year that saw stock
prices later plunge amid a growing financial crisis in Asia. Far away from Wall
Street, it was the year that the U.S. first heard the name Monica Lewinsky,
whose relationship with President Bill Clinton led to his impeachment and
trial. And it was the year that the world was stunned by the death of Britain's
Princess Diana, on Aug. 31.
On Monday, the S&P 500 did close above its Nov. 21 trading low of 741.02. But
the 14-month recession has decimated the major indexes: The Dow is down 49.8
percent from its record highs of October 2007, while the S&P 500 index is down
52.5 percent.
Detrick warned that a move below the S&P's Nov. 21 low could set off "violent
selling" as even more confidence drains from the market.
The technology-laden Nasdaq composite index dropped 53.51, or 3.71 percent, to
1,387.72.
Investors looking for a bottom also dumped smaller stocks. The Russell 2000
index of smaller companies fell 16.38 or 3.99 percent, to 394.58.
Declining issues outnumbered advancers by more than 6 to 1 on the New York
Stock Exchange, where consolidated volume came to 6.35 billion shares compared
with heavy volume of 8.12 billion shares on Friday.
Morgan Smith, investment counselor for Burns Advisory Group, said investors are
now pushing out their expectations for a recovery in the industry until after
this year.
"Everyone is trying to grasp at some type of bottom," Smith said. "The market
is just trying to figure out if it has priced in a worst-case scenario."
Among tech stocks, Hewlett-Packard Co. fell $1.96, or 6.3 percent, to $29.28,
and Intel Corp. dove 70 cents, or 5.5 percent, to $12.08.
Other big losers included General Electric Co., which dropped to a 14-year low
of $8.80, but ended down 53 cents, or 5.7 percent, at $8.85. Aluminum producer
Alcoa Inc. tumbled 48 cents, or 7.6 percent, to $5.81.
Some financial stocks managed to gain, including Citigroup, which rose 19
cents, or 9.7 percent, to $2.14, and Bank of America Corp., which gained 12
cents, or 3.2 percent, to $3.91.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which
moves opposite its price, fell to 2.77 percent from 2.79 percent late Friday.
The yield on the three-month T-bill, considered one of the safest investments,
rose to 0.28 percent from 0.26 percent Friday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell $1.59 to settle at $38.44 per barrel on the New York
Mercantile Exchange.
Overseas, Britain's FTSE 100 fell 0.99 percent, Germany's DAX index fell 1.95
percent, and France's CAC-40 slipped 0.82 percent. Earlier, Japan's Nikkei
stock average fell 0.54 percent.