http://www.foxbusiness.com/story/markets/aig-bailout-leads-futures-lower/Wow!!! How low can it go??
he relentless selling on Wall Street hit another low point on Monday as fallout from the latest rescue of AIG and more financial jitters combined to shove the Dow to fresh 12-year lows and to its worst start to March ever.
Today’s Markets
The Dow Jones Industrial Average fell 299.64 points, or 4.24%, to 6763.29, the S&P 500 lost 34.27 points, or 4.66%, to 700.82 and the Nasdaq Composite sank 54.99 points, or 3.99%, to 1322.85. The consumer-friendly FOX 50 dropped 22.34 points, or 4.04%, to 530.50.
“Generally speaking, there is literally no place to hide, nor has there been a place to hide for the last six to nine months. The best place to have been would have been completely in cash,” NYSE trader Ted Weisberg of Seaport Securities told FOX Business. “Is there a rally here? Absolutely. Are we oversold? Absolutely. What will spark that rally? I don’t know.”
While the $30 billion in new aid for American International Group (AIG) was at the forefront Monday, the markets were also slammed by a 6% plunge from the financial sector, a global equity selloff and new data showing the U.S. savings rate hit 14-year highs as its manufacturing sector shrank for the 13th consecutive month. Underscoring growing economic fears, crude oil plummeted 10.3% Monday, its worst day in nearly two months.
The most recent selling on Wall Street has been an “orderly death march,” said Frank Davis, director of sales and trading at LEK Securities. "It’s slow and methodical. There are no shocking aberrations. We’re not getting the purge or the vehement rally.”
Back to 1997
Just days after suffering its worst February since 1933, the Dow plunged below the psychologically-important 7000 mark on Monday to its worst closing level since April 1997. The benchmark index, which is mired in its longest monthly losing streak since September 2002, suffered its worst first day of March trading ever, easily exceeding 1931's 2.78% decline. The broader S&P 500 briefly fell through the critical 700 level and ended at its worst level since at least October 1996.
“When the market is at an 11-year low, that scares the guy on the street. That gets a lot of press over the weekend and brings in more panic on a Monday morning,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
All but one of the Dow's 30 components tumbled by at least 2% on Monday, led by Citigroup (C), aluminum maker Alcoa (AA) and General Electric (GE). On the other hand, Microsoft (MSFT) and McDonald's (MCD) saw more modest selling.
The Nasdaq Composite, which still hasn't fallen through its November lows, also fell sharply as biotech companies like Amylin Pharmaceuticals (AMLN) and Genzyme (GENZ) plunged.
Banks Slam Markets
As has been the case during most of Wall Street's recent selloffs, the financial sector led the way down on Monday, falling 6%. Other financials like Fifth Third Bancorp (FITB) and CIT Group (CIT) fell even further, while GE, Citi and Bank of America (BAC) all hit fresh multi-year lows.
"We just want them to stop going down. They don't have to lead us back higher but we want them to find a bottom," Ben Willis of VDM Institutional Brokerage told FOX Business.
Financial jitters were stoked by HSBC (HBC), Europe’s largest bank, which announced plans to raise $18 billion and slash 6,100 jobs after reporting a 70% plunge in 2008 net profit. The HSBC news sent stocks spiraling overseas as Asian markets lost 4% overnight and London's FTSE 100 sank 5.33%, its worst selloff since November.
At the same time, the markets are still anxiously awaiting more details from Treasury Secretary Timothy Geithner on how regulators will help banks get rid of their toxic assets. The Dow has lost almost 1200 points since Geithner unveiled his rescue plan on Feb. 12.
Third Time the Charm for AIG?
In its third attempt to stabilize AIG, the government unveiled plans Monday to provide $30 billion in new capital to the company as part of a revised bailout that offers more lenient conditions for the insurer but greater risk for taxpayers. Also, the government, which left the door open to further aid for AIG, said the insurer will further restructure its operations as it tries to hold onto its coveted credit rating.
The new aid for AIG was announced as the insurer struggled to repay its existing $150 billion rescue after losing $61.7 billion in the fourth quarter -- the largest quarterly loss in U.S. corporate history, amounting to losing $27.9 million every hour, or $7,762 per second.
“AIG a year ago would have been crazy…news,” but today it’s just another headline, said Davis. “We need three Ph.D’s in the room to figure out the depth” of this bailout.
Once the world's largest insurance company, AIG has lost 98% of its market cap over the past six months due to enormous losses related to insurance it sold for the risky mortgage-backed securities at the heart of the crisis.
"It’s clear the government believes AIG is too large and counterparty risk too great to allow the company to fail outright," Dan Greenhaus, equity analyst at Miller Tabak, wrote in a research note.
(Click here to read the full story on the AIG rescue.)
Commodities weren't spared the selling as crude oil plunged and gold extended its losing streak to six, the longest dry spell since October. The price of a barrel of crude settled at $40.15, down $4.61. Gold fell $2.50 per ounce to $939, the lowest level in three weeks.
Data Dump
Economic fears were reinforced by an avalanche of ugly new reports, headlined by Institute for Supply Management's manufacturing index, unexpectedly rose to 35.8 last month. The trade group said hopes for a 2009 recovery are "generally pessimistic."
The government said consumer spending increased in January for the first time in seven months but the nation’s savings rate jumped to the highest level in 14 years. Personal income rose 0.4% in January, compared to a forecast for a 0.3% decline.
According to the Commerce Department, U.S. construction spending fell twice as much as expected in January, shrinking 3.3% to the lowest level since 2004.
Corporate Movers
Bank of America (BAC) CEO Ken Lewis told the Financial Times he hasn't considered resigning "for one second," saying he intends to stay at the helm until the bank pays back the $45 billion it has received from the government. He also said taking $20 billion in government aid to help the takeover of Merrill Lynch was a "tactical error," the newspaper reported.
Berkshire Hathaway (BRK), Warren Buffet's holding company, suffered a 96% plunge in fourth-quarter profit as one of the world’s most admired investors had his worst year ever.
General Motors (GM) will announce plans to sell part of its European unit Opel in an effort to receive $4.18 billion in aid from Europe, The Wall Street Journal reported. GM could soon say it will sell at least 25% of Opel and cut $1.2 billion in costs by closing as many as four plants, the newspaper reported.
Freddie Mac (FRE) CEO David Moffett is resigning no later than March 13 after taking over when the government seized the mortgage giant in September. No successor has been named. Moffett's resignation wasn't sought by regulators but rather partly reflects his "frustration" with a job offering little freedom of maneuver, the Journal reported.
NYSE Euronext (NYX), the operator of the New York Stock Exchange, won't touch its dividend until December, CEO Duncan Niederauer told FOX Business.
Dish Network (DISH) fell sharply after the satellite TV provider said it lost 102,000 subscribers and posted an in-line profit of 48 cents per share.
International Paper (IP) fell to fresh 52-week lows after the largest U.S. paper and packaging maker slashed its dividend by 90%.
Wendy's/Arby's Group (WEN) posted an adjusted-profit of 5 cents per share, matching analyst estimates.
Global Markets
European markets suffered steep losses on Monday as the Dow Jones Euro Stoxx 50, which gauges the 50 largest companies in Europe, fell 4.73% to 1882.79, its lowest close since March 2003. London's FTSE 100 plummeted 5.33% to 3660.34 and Germany's DAX fell 3.48% to 3710.07, its worst level since August 2004.
In Asia, Tokyo's Nikkei 225 fell 3.8% to 7280.15 while Hong Kong's Hang Seng fell 3.9% to 12317.46. Australia's ASX 200 fell 2.8% to 3250.10.
Topic: DJIA Collapses 4.24% Down 300 points to 6763.29 worst March day EVER (Read 819 times)