Dow drops below 7,000 point mark - first time since 1997

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(Agencies)
Updated: 2009-03-03 07:59

NEW YORK – A relentless sell-off in the stock market Monday blew through barriers that would have been unthinkable just weeks ago, and investors warned there was no reason to believe buyers will return anytime soon.

Specialist Michael Sollitto works on the floor of the New York Stock Exchange Monday, March 2, 2009. [Agencies]

The Dow Jones industrial average plummeted below 7,000 at the opening bell and kept driving lower all day, finishing at 6,763 -- a loss of nearly 300 points. Each of the 30 stocks in the index lost value for the day.

And the Standard & Poor's 500 stock index, a much broader measure of the market's health, dipped below the psychologically important 700 level before closing just above it. It hadn't traded below 700 since October 1996.

Investors were worried anew about the stability of the financial system after insurer American International Group posted a staggering US$62 billion loss for the fourth quarter, the biggest in US corporate history -- and accepted an expanded bailout from the government.

But beyond daily headlines, Wall Street seems to have given up the search for a reason to believe that the worst is over and the time is ripe to buy again.

"As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading, who said he believes the Dow might fall to 5,000 and the S&P to 500.

The Dow's descent has been breathtaking. It took only 14 trading sessions for the average to fall from above 8,000 to below 7,000. For the year, the Dow has lost 23 percent of its value.

Its last close below 7,000 was May 1, 1997 -- a time when the market was barreling to one record high after another because of the boom in technology stocks, but often suffered big drops as investors worried about inflation and rising interest rates.

This time around, Wall Street analysts seem to believe that a stock market recovery will first require signs of health among financial companies, and on Monday those signs seemed further away than ever.

AIG, whose reach is so vast that the government warns letting it fail would cripple the very world financial system, will get another US$30 billion in loans on top of the US$150 billion already invested by the government.

HSBC PLC, Europe's largest bank by market value, said it needs to raise about US$18 billion, reported a 70 percent drop in earnings for last year, and announced plans to scale back US lending and cut 6,100 jobs.

The banking sector helped drive the market lower. Citigroup stock lost 20 percent of its value and fell to a paltry US$1.20 per share. HSBC lost 19 percent. Bank of America lost 8 percent.

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