Wall Street tumbles to 12-year low as US comes to AIG aidMarch 3rd, 2009 - 10:48 am ICT by IANS
New York, March 3 (IANS) Wall Street tumbled with the Dow and S&P 500 falling to a 12 year low after insurance giant American International Group reported the biggest quarterly loss in corporate history.
The Dow Jones industrial average Monday lost almost 300 points, or 4.2 percent to end at 6763.29, its lowest point since April 25, 1997. The S&P 500 index lost 34 points, or 4.7 percent, ending at 700.82, its lowest close since Oct 28, 1996.
The Nasdaq composite lost 55 points, or 4 percent to end at 1322.85. The tech-fuelled Nasdaq has held up better than the other major averages this year and remains above its close of 1316.12 from Nov 20, 2008.
The stock losses Monday were in response to AIG, but also a continuation of the worries about the financial sector and the economy, CNNMoney.com cited Bill Stone, chief investment strategist at PNC Financial Services as saying.
Investors also remain wary about the various government initiatives to try to stem the recession, announced over the last few weeks, Mark Travis, president and CEO at Intrepid Capital Funds was quoted as saying.
They include the newest bank bailout plan, the $787 billion economic stimulus plan and the $75 billion mortgage modification plan.
AIG reported a $62 billion fourth-quarter loss, the largest in US corporate history, on turmoil in the credit markets and massive restructuring costs. For the full year, AIG lost $99 billion after reporting a profit of $9.3 billion in 2007.
To keep the company from collapsing and infecting the broader financial market, the government is revising its bailout for the third time and committing another $30 billion in exchange for cumulative preferred stock. The rescue plan now totals $162.5 billion.
Stocks tumbled Friday after the government said it will control as much as 36 percent of Citigroup’s common stock. Also in play was a report showing the economy shrank at its sharpest pace in 26 years in the fourth quarter of 2008.
Meanwhile, the Institute for Supply Management’s manufacturing index rose modestly to 35.8 in February from 35.6 in January, after 12 months of declines.
Economists expected a drop to 34, according to a Briefing.com survey. Despite the advance, the sector remains in a period of contraction, with any reading under 50 indicating weakness.