Dow Below 7,000 as Financials Take Hit
The Dow Jones Industrial Average opened at its lowest level in 12 years, slipping below 7,000 as investors grew increasingly skittish over the state of the stock market amid the wave of government bailouts.
The Dow 30 and S&P 500 both approached 2 percent drops, though the Nasdaq tech barometer was a bit higher.
Financials led Wall Street lower, as another government intervention scared the market.
The big bailout news for Monday focused on American International Group, which reported a $61.7 billion quarterly net loss, after the government was forced to extend billions in fresh capital into the insurance giant for the third time.
The $30 billion bailout provided a stark reminder that some of America’s biggest corporations are still in a critical condition.
Shares of AIG gained sharply following news of the capital injection and earnings.
But the climate of uncertainty continued to spread havoc through the market, particularly in financials.
Among the big early losers in the sector were JPMorgan Chase and Bank of America , while shares of PNC Financial also dropped after it said it was cutting its dividend in a move it said would save $1 billion.
Outside financials, Verizon fell 3 percent, while General Motors lost 5.8 percent.
CNBC.com-parent General Electric shares continued to slump after the company announced Friday it was cutting its dividend but still in danger of losing its triple-A credit status.
A sharp drop in oil prices hit energy producers. US light, sweet crude dropped more than $2 a barrel to below $43, and Chevron shares lost 1.6 percent premarket.
Also in the sector, Chesapeake Energy saw its shares drop as the company announced it cut back 7 percent on production capacity and more cuts are being considered.
Elsewhere, shares of Dish Network surged after the company reported that fourth-quarter net income rose 24 percent as revenue gains offset a loss in customer base.
International Paper also announced a dividend cut to 2.5 cents a share from 25 cents, a move expected to last well into the future and one expected to preserve $100 million each quarter.
Concern over the financial sector dominated sentiment over in Europe as well, as banking giant HSBClaunched a $17.7 billion rights issue in the wake of severe losses caused by bad debts.
The gloomy outlook for investors was underscored by the annual letter from billionaire investor Warren Buffett to Berkshire Hathaway shareholders. Buffett admitted “dumb” mistakesthat led to a 96 percent fall in fourth quarter net profit.
On the political front, President Barack Obama will meet UK Prime Minister Gordon Brown this week in the hope of cementing ties between the two countries and working together to combat the financial crisis.
The state of the economy is in focus, with early economic numbers showing a gain in both consumer spending and income, as well as a savings rate hike to 5 percent, the highest levels since 1995. The ISM manufacturing for February and January’s construction spending data are out at 10 am.
Meanwhile, Boston Federal Reserve President Eric Rosengren will speak at the IIB Annual Conference in Washington at 11:30 am. Richmond Fed President Jeffery Lacker will talk on the subject of government lending and monetary policy in Washington at 12:45 pm.