Stocks flirt with multi-year lows
By Alexandra Twin
Stocks tumbled Monday afternoon as investors continued to worry that the government's efforts to slow the recession won't be sufficient.
The Dow Jones industrial average (INDU) lost 140 points, or 1.9%, with roughly 2-1/2 hours left in the session. The Dow ended the last session at the lowest point since Oct. 9, 2002, at the bottom of the last bear market.
Should it close where it stood at 1:30 p.m. ET, the Dow would be at an 11-year low.
The S&P 500 (SPX) index lost 16 points, or 2.1%. The index ended the previous session at the lowest point since Nov. 20, seen by some as the low of the current bear market.
Should it close where it stood at 1:30 p.m. ET, the S&P 500 would also be at an 11-year low.
The Nasdaq composite (COMP) lost 34 points, or 2.4%. The tech-fueled index has done better than the rest of the market and remains above its January lows.
Stocks had gained in the early going on enthusiasm that the government may boost its stake in Citigroup, briefly assuaging fears that the troubled bank would have to be nationalized.
But any early advance petered out, as the worries of the last few weeks returned.
"There is just nobody who wants to buy right now," said Ron Kiddoo, chief investment officer at Cozad Asset Management.
"The news was a little bit upbeat overnight when it looked like Citigroup might find some stability, but now the skepticism is back," he added. "I think we need to hear some optimistic talk from our leaders and soon."
Financials: Stocks have tumbled over the last two weeks on worries that the government won't be able to slow the recession, despite announcing a series of programs. On Friday, stocks slipped on worries that Citigroup and Bank of America might have to be taken over by the government altogether.
Some of those worries were tempered Monday on reports that the government is looking to boost its stake in Citigroup (C, Fortune 500), something that would fall short of full nationalization but would enable it to avoid bankruptcy. Should Citigroup be fully nationalized by the federal government or forced to declare bankruptcy, that would wipe out all shareholder value. Citi shares gained 10%.
Separately, Treasury said in a joint statement with other departments that the government is ready to give more money to banks if they need it. The Capital Assistance Program begins Wednesday.
The program, previously announced by Treasury Secretary Timothy Geithner, involves giving banks "stress tests" to determine how they are doing and whether they need more money.
Company news: Meanwhile, the Treasury is also considering its options as General Motors (GM, Fortune 500) and Chrysler continue to flounder, despite having received billions in federal aid. According to a Wall Street Journal report Monday, the administration believes the possibility of Chapter 11 bankruptcy filings by the two companies must be seriously considered. GM shares gained 5%.
Fellow automaker, Ford Motor (F, Fortune 500) has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 10%.
A variety of big tech stocks slumped, including Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500) and Dell (DELL, Fortune 500).
Yahoo (YHOO, Fortune 500) could announce a major management reorganization as early as Wednesday, although more likely next week, according to a published report Monday. Yahoo shares declined modestly.
Market breadth was negative. On the New York Stock Exchange, losers beat winners four to one on volume of 740 million shares. On the Nasdaq, decliners topped advancers by more than two to one on volume of 1.01 billion shares.
Economists: A leading group of economists expect a deeper recession in the first half of the year followed by a modest recovery in the second half and a bigger recovery in 2010.
Reports are due later this week on housing, manufacturing and gross domestic product growth.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.80% from 2.79% Friday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, most Asian markets ended mixed, while European shares fell in afternoon trading.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for April delivery fell $1.19 to $38.34 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery fell $5.20 to $997 an ounce.
source : CNNmoney.com
