Wall St. has worst drop since 2001
NEW YORK (CNNMoney.com) — Stocks tanked Monday, amid the largest financial crisis in years after Lehman Brothers filed for the biggest bankruptcy in history, Bank of America said it would buy Merrill Lynch and AIG slumped on fears that it can’t raise cash.
Treasury prices rallied as investors sought the comparative safety of government debt, sending the corresponding acheter cialis yields lower. Oil prices tumbled, falling well below $100 a barrel on slowing global economic growth. The dollar rallied versus the euro and gold prices spiked.
The Dow Jones industrial average (INDU) lost 504 points, or 4.4%. It was the biggest one-day decline for the Dow on a point basis since Sept. 17, 2001, when the market reopened for trading after having levitra been closed in the aftermath of 9/11 terrorist attacks. On a percentage basis, it was the biggest decline since July 19, 2002.
The Standard & Poor’s 500 (SPX) index lost 4.7%, its worst day since Sept. 17, 2001, when it plunged 4.9%. The S&P 500 also closed at its lowest point since Oct. 27, 2005.
The Nasdaq composite (COMP) lost 3.6%, its worst single-session percentage decline since March 24, 2003. It left the tech-fueled average at its lowest point since March 17 of this year.
"It was an ugly day," said James King, president and chief investment officer at National Penn Investors Trust Company. "Lehman’s failure to find a suitor and Merrill deciding to cash in their chips before a similar fate could befall them really stoked the fears of the public."
AIG exacerbated those fears in the afternoon. And all the bad news isn’t out there yet, King said. "Investor confidence is at the lowest point we’ve seen in a while."
He said that after the government bailout of Fannie Mae and Freddie Mac last week and all the other financial market bad news, this was just too much for investors.
But it doesn’t mean that the stock market is likely to see these kind of massive selloffs on a regular basis, King said. Nasdaq and S&P futures pointed to a higher open Tuesday, when fair value is taken into account.
After the close of trade, S&P said it is cutting its debt rating on mortgage lender Washington Mutual (WM, Fortune 500) to junk status, reflecting the ongoing credit market meltdown and WaMu’s exposure to the housing market. WaMu shares fell almost 27% during the session and lost another 11% in extended-hours trading.
Also after the close, Hewlett-Packard (HPQ, Fortune 500) said it will cut 24,600 jobs, or 7.5% of the combined workforce of HP and the recently-purchased EDS. Shares were barely changed in extended-hours trading.
Stock market meltdown: Global markets tumbled as investors reeled after Lehman Brothers filed for bankruptcy, Merrill Lynch was forced to sell itself to Bank of America and investors awaited AIG’s restructuring announcement.
"You have to throw out the history books because there’s really nothing to compare this to," said Jim Dunigan, chief investment officer at PNC Advisors.
"Any speculation as to what inning we’re in becomes difficult because each step of the way seems to bring another drop," Dunigan said.
Art Hogan, chief market strategist for Jefferies & Co., said the magnitude of the financial industry fallout is unprecedented, and could only be compared to the Great Depression of the 1930s or the railroad bankruptcies of the 1800s.
"We’ve never witnessed this before," said Hogan. "There’s no road map for this."
Dow-component insurer AIG and mortgage lender Washington Mutual are the latest companies to spark investor fear.
AIG has been scrambling to raise enough cash to fend off ratings agency downgrades and stay afloat.
N.Y. Gov. David Paterson said in the afternoon that AIG will be allowed to use $20 billion in assets through its subsidiaries to stay afloat, basically providing itself with a bridge loan. AIG has also reportedly asked the Federal Reserve for a roughly $40 billion bridge loan over the weekend.
In addition, the federal government has asked Goldman Sachs and JP Morgan to lead a $70 billion to $75 billion lending pool for the company, the Wall Street Journal reported. (Full story)
Shares of AIG (AIG, Fortune 500) slumped 60.8%.
The developments of the day cemented for investors that the credit crisis is far
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(Reuters)