MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks plunged and the
major indexes closed at their lowest levels in more than a decade as
more anemic manufacturing data hurt Alcoa and more government
intervention in the financial sector was interpreted as an ominous sign
for shareholders of Citigroup.
General Electric, both a major lender and a major manufacturer,
continued its decline as the stock, once a perennial pick for safe
portfolios, sold off to levels associated with distressed "fallen
angels."
The Dow Jones Industrial Average closed down 299.64 points, or 4.24%,
to 6763.29, its lowest close since April 25, 1997, and the first close
below 7000 since May 1, 1997. The broad Standard & Poor's 500 index
fell 34.27 points, or 4.66%, to 700.82, its lowest finish since Oct.
25, 1996.
The biggest percentage decliner on the Dow was Citi, which fell 30
cents, or 20%, to 1.20, as investors feared the latest dilutive
government rescue would not be the last. Bank of America, another bank
undergoing a "stress test" to determine its capital position, fell 32
cents, or 8.1%, to 3.63.
GE fell 91 cents, or 11%, to 7.60, a roughly 15-year low. On Friday,
the conglomerate said it was going to cut its quarterly dividend for
the first time in 71 years, to 10 cents from 31 cents.
Despite that cash saving, traders worried that its finance unit would
see its critical AAA credit rating cut. In a sign of elevated fears,
the cost of insuring GE Capital's debt against default spiked.
Manufacturing data indicated that a freeze in industrial activity
continued into February, while further government intervention in
American International Group raised fears of an incremental
nationalization of the U.S. financial sector.
"We're in a bottoming process and it's going to take a while," said
Anthony Conroy, head equity trader at BNY ConvergEx.
"Two things need to happen for the market to bottom: financials need to
be healthy and the housing market needs to stabilize," Conroy said.
Conroy said "healthy banks" were a prerequisite for a healthy financial system and a healthy economy.
Conroy expects a "soft nationalization," where the government avoids
complete ownership of all major banks, yet helps wind down some of the
weaker ones.
Wow! My stocks and 401k are taking a beating. I've opted to get liquid by ceasing additional 401k investing and have instead taken that cash and started putting into savings. When will we see the bottom?