With news that the U.S. government would take up to a 36% stake in the banking giant Citigroup combined with a big dividend cut from the corporate mothership General Electric, stocks fell to fresh multi-year lows on Friday.
Not to be outdone with corporate news, the economic data was just as dismal, with the U.S. Commerce Department saying that the nation's economy contracted by a stunning 6.2% last quarter.
Today’s Markets
At the 4 p.m. preliminary close in New York, the Dow Jones Industrial Average dropped 119.15 points, or 1.66%, to 7062.93, the broader market S&P 500 index fell 17.74 points, or 2.16%, to 736.54 and the Nasdaq Composite was down 13.63 points, 0.98%, to 1377.84. The consumer-friendly Fox 50 Index fell 14.15 points, or 2.5%, to 552.84.
It was another brutal month for Wall Street. With today's drop, the Dow fell nearly 13.5% in February - the worst February in U.S. market history. The S&P 500 was just as bad - falling slightly more than 13% during the month.
Today's S&P 500 close brings that broad market index to its lowest level since Dec. 1996.
The Dow was led sharply lower Friday by the once-mighty financial conglomerate Citigroup (C), which saw its shares fall to $1.50 a share in extremely heavy trading.
Other financial members of the Dow – JPMorgan Chase & Co. (JPM) and Bank of America (BAC) – also saw their shares fall heavily. Bank of America, which has also felt the pain of market fears that the Charlotte-N.C. based bank could need more government aid, saw its shares drop more than 20%.
General Electric (GE), another Dow member, saw its shares move lower by more than 6.5% after the company said it would cut its dividend from 31 cents to 10 cents a share.
Trader speculation that GE would cut its dividend had been rampant for months now because of the company’s exposure to the financial markets through its GE Capital division. GE Chief Executive Jeff Immelt had said repeatedly that the company’s dividend was not in question.
Citigroup was led lower Friday after the bank said it offer to exchange $27.5 billion of preferred shares into common stock as part of government program to help boost some key technical indicators of the bank’s financial health.
As part of the conversion program, the Treasury Department will match each conversation up to $25 billion. Based on the maximum conversion rate, the conversion program would give the U.S. government a 36% stake in the struggling financial giant.
Wall Street also got a very dismal second read on fourth-quarter gross domestic product that will weigh heavily on the market as well.
According to the U.S. Commerce Department, the nation's gross domestic product contracted by 6.2% during the fourth quarter, revised down from the 3.8% first read that the markets got last month
The contraction was much more than what economists were looking for, who expected the nation's economy would contract by 5.4%. It is the worst percentage contraction in the nation's GDP in more than 25 years.
In the commodity markets, oil dropped 82 cents to $44.37 a barrel in NewYork-based electronic trading, while gold gained 70 cents to $943.30 a troy ounce.
Company News
General Electric (GE) said Friday it would cut its quarterly dividend to 10 cents a share, down from 31 cents a share, starting in the third quarter. The cut in a dividend will save $9 billion in costs for the conglomerate, the company said.
Bank of America (BAC)CEO Ken Lewis testified with New York's Attorney General for four hours Thursday about $3.6 billion in bonuses Merrill Lynch employees took home in 2008, according to a report in The Wall Street Journal.
PCgiant Dell (DELL) reported Thursday afternoon a quarterly profit of $351 million, down 48% from a profit of $679 million from a year ago. Revenue fell 16% to $13.4 billion.
Sony (SNE) said Friday that Chairman and Chief Executive Howard Stringer will now also become president.
Private equity company Blackstone Group (BX) reported a fourth-quarter loss of $415.2 million, or $1.52 a share. Blackstone said that Steve Schwarzman, its chairman and CEO, would not take a bonus for 2008.
Barclays Capital analysts cut General Motors (GM) target price to 50 cents, and rated the company as "underweight," commonly used by investment banks to say "sell."
Ford Motor Co.'s (F) sales analyst said the car company sees auto demand in the 7 million annualized unit range for February, down from the 8 million unit range for January.
Pharmaceutical company Schering-Plough (SGP) announced a quarterly dividend of 6.5 cents a share.
Global Markets
European markets closed sharply lower Friday morning on the Citigroup news. The Dow Jones Euro Stoxx 50 Index, which gauges the 50 largest companies in Europe, fell 2.22% to 1976.23.
In the individual European markets, London's FTSE100 fell 2.18% to 3830.09 while Germany's DAXfell 2.51% to 3843.74 and Paris's CAC40 fell 1.54% to 2702.48.
In Asia, where investors did not get a chance to react to the Citi news, Japan's Nikkei 225 rose 1.48% to 7568.42 while Hong Kong's Hang Seng fell 0.65% to 12811.57. Australia's ASX200 fell 0.03% to 3344.50.
Consol Net Jumps on Coal Prices; Dominion Results Mixed
Trifecta of Bad News Slams Motorola Shares
Large banks take beating on Wall Street
