Major Stock Market Indexes Fall to 1997 Levels
The Standard & Poor's 500 index fell to April 1997 levels Monday, while the Dow Jones industrial average, down about 215 points, reached its levels of October 1997 as investors succumbed to their growing worries about a recession that has no end in sight.
"People left and right are throwing in the towel," said Keith Springer, president of Capital Financial Advisory Services.
Most financial stocks were pounded even as government agencies led by the Treasury Department said they will launch a revamped bank rescue program that 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 that 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 are also falling after The Wall Street Journal reported that Yahoo Inc.'s new chief executive is planning a companywide reorganization. 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. The major indexes plunged through the lows they reached in late November, at the height of the credit crisis.
In the final hour of trading, the Dow dropped 215.76, or 2.93 percent, to 7,149.91, after earlier falling to its lowest level since Oct. 28, 1997.
The Standard & Poor's 500 index fell 22.12, or 2.87 percent, to 747.93. Earlier, the S&P fell to its lowest level since April 1997.
The technology-laden Nasdaq composite index dropped 44.60, or 2.41 percent, to 1,406.46.
The Russell 2000 index of smaller companies fell 13.08 or 3.18 percent, to 397.88.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to a light 1.03 billion shares.
Among tech stocks, Hewlett-Packard Co. fell $1.56, or 5 percent, to $29.68, and Intel Corp. dove 67 cents, or 5.2 percent, to $12.11.
Other big decliners included General Electric Co., which dropped to a 14-year low of $8.80, but later traded down 48 cents, or 5.1 percent, at $8.90. Alcoa Inc. tumbled 43 cents, or 6.8 percent, to $5.86.
Some financial stocks managed to hold on to their earlier gains, including Citigroup, which rose 33 cents, or 16.7 percent, to $2.28, and Bank of America Corp., which gained 30 cents, or 7.9 percent, to $4.09.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.78 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 $1.90 to $38.13 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.