In Steep and Swift Fall, Dow Lands at 6-Year Low
Friday, February 20, 2009
NEW YORK, Feb. 19 -- The Dow Jones industrial average slid to its lowest level in six years Thursday on fears about the weak financial system and a gloomy jobs outlook.
The Dow's fall illustrates the rapid destruction of wealth in the stock market during the financial crisis. The Dow now stands at about half of its all-time high of 14,164, reached in October 2007. The total value of all shares of companies on the Dow has dwindled to $2.45 trillion, down from $4.51 trillion.
With banks stocks weighing on the market Thursday, the Dow sank 1.2 percent to 7465.95, dipping below the bear market low of 7552 reached in November. The index is now at its lowest level since October 2002.
Bank stocks have tumbled as investors grow increasingly nervous about the fragile economy and the pile of toxic mortgage assets clogging the financial system. Treasury Secretary Timothy F. Geithner last week announced a bank rescue plan that disappointed traders for its lack of details.
Both Bank of America and Citigroup fell about 14 percent Thursday. American Express was also hit hard, losing almost than 9 percent because of growing concerns about consumers' ability to make good on credit card debt.
"The uncertainty about the banks has kept the black cloud over the markets," said Todd Clark, director of trading at Nollenberger Capital Partners. The markets are not likely to recover "until we find out what Treasury's plan is to come to the aid of these money center banks," he said.
The Standard & Poor's 500-stock index, a broader market measure, fell 1.2 percent, to 778.94. The tech-heavy Nasdaq composite index lost 1.7 percent, to 1442.82. Both indices are still above their bear-market lows in November.
Some analysts said the Dow's new low could further fuel anxiety and cause more selling.
"There's almost a multiplier effect in fear," said David N. Dreman, chief investment officer of Dreman Value Management. "We're really in a historic type of bear market. It's an incredibly nervous market. There's fear that we're not going to recover for a long, long time."
Thursday's losses came after the Labor Department said the number of people receiving unemployment benefits neared 5 million last week. First-time jobless claims stayed flat at 627,000. The Federal Reserve on Wednesday said the unemployment rate would remain elevated through at least 2011.
Reversing months of decline, wholesale prices rose 0.8 percent last month, according to the Labor Department. The rise in the producer price index, which measures wholesale prices for various goods, was bigger than analysts expected.
Meanwhile, another set of government data showed a surprise decline in domestic crude oil inventories. The report prompted a surge in the crude oil price, which rose 14 percent on the New York Mercantile Exchange, to $39.48 a barrel.
Hewlett-Packard was down 8 percent after the huge computer and printer company reported disappointing earnings. The company's first-quarter profit fell 13 percent, and it cut its forecast for the rest of 2009.
A bright spot was Sprint Nextel, which surged 20 percent despite reporting a $1.6 billion loss during its fourth quarter. The results beat analysts' expectations.
Staff writer Renae Merle contributed to this report.