Dow’s tumbles 504 in sixth-worst drop
NEW YORK » A stunning makeover of the Wall Street landscape sent stocks falling precipitously yesterday, with the Dow Jones industrials losing 500 points in their worst slide since the September 2001 terrorist attacks. Investors recoiled after a shakeup of the financial industry that took out two storied names: Lehman Brothers Holdings Inc.
and Merrill Lynch & Co.
The pullback, which erased about $700 billion in shareholder wealth, occurred across much of the globe as investors absorbed Lehman's bankruptcy filing and what was essentially a forced sale of Merrill Lynch to Bank of America for $50 billion in stock. While those companies' situations had reached some resolution, the market remained anxious about American International Group Inc., which is seeking funding to shore up its balance sheet. A faltering of the world's largest insurance company likely would have implications far beyond that of Lehman, already the largest U.S. bankruptcy in terms of assets.
AIG's troubles are worrisome for investors because of the company's enormous balance sheet and the risks that its troubles could spill over to the companies with which it does business. AIG fell $7.38, or 61 percent, to $4.76.
The market was expected to remain fractious when trading resumes today and will be waiting anxiously for the outcome of today's Federal Reserve's regular policymaking meeting.
The Dow fell 504.48, or 4.42 percent, to 10,917.51, moving below the 11,000 mark for the first time since mid-July. It was the worst point drop for the Dow since it lost 684.81 on Sept. 17, 2001, the first day of trading after the terror attacks.
In percentage terms, the drop was the steepest since July 19, 2002. It was also the sixth-largest point drop in the Dow, just behind the 508.00 it suffered in the October 1987 crash. The Dow is down about 23 percent from its record high of 14,198.09 last October.
The Standard & Poor's 500 index declined 59.00, or 4.71 percent, to 1,192.70 - also its biggest drop since 9/11 and the first time it closed below 1,200 in three years.
The Nasdaq composite index fell 81.36, or 3.60 percent, to 2,179.91; that was its worst point loss since Jan. 4.
The Russell 2000 index of smaller companies fell 30.50, or 4.23 percent, to 689.76.
Declining issues overwhelmed advancers on the New York Stock Exchange, where 164 stocks rose compared with 3,064 that fell. Consolidated volume came to an extremely heavy 8.05 billion shares, compared with 6.11 billion traded Friday.
Light, sweet crude closed below $100 for the first time in six months as it fell $5.47 to settle at $95.71 on the New York Mercantile Exchange.
The yield on the benchmark 10-year Treasury note fell to 3.41 percent from 3.72 percent late Friday. The dollar was lower against other major currencies, while gold prices rose.