A perfect storm of bad news ripped through Wall Street on Thursday, sending the Dow diving 281 points, the Nasdaq Composite to six-year lows and shares of Citigroup below the $1 mark for the first time ever.
The markets never stood much of a chance as concerns about the health of the nation's banks, the future of General Motors and China's ability to lead the world out of the global recession slammed stocks once again.
Today's Markets
The Dow Jones Industrial Average fell 281.40 points, or 4.09%, to 6594.44, the S&P 500 lost 30.32 points, or 4.25%, to 682.55 and the Nasdaq Composite dropped 54.15 points, or 4.00%, to 1299.59. The consumer-friendly FOX 50 sank 21.13 points, or 3.95%, to 513.47.
“In 35 years on Wall Street I never thought I would see this sort of a day. It’s very disconcerting to investors to see the staples of the financial sector trading below $1,” NYSE trader Doreen Mogavero told FOX Business, referring to Citigroup (C) and AIG (AIG). “It’s just another bombardment of negative news in the marketplace. We really need something to stop it and I think it’s got to be [positive] housing” news.
The massive selloff -- the second 200-point plunge of this week alone -- made a 150-point jump on the Dow from Wednesday evaporate, and then some. The benchmark index is now off by 25% year-to-date amid serious fears about how long the recession will last and what the government will do to stem the tide.
“Financials are getting slammed again. They are down 50% for the year. This is one of those days where nothing goes right,” said Dan Greenhaus, equity analyst at Miller Tabak. “On days like this, there’s just not going to be hope for the market, especially when it’s in a weakened state.”
Led by double-digit plunges from Alcoa (AA), JPMorgan Chase (JPM) and General Motors (GM), the Dow ended at its lowest level since April 1997 on Thursday. Despite the heavy losses, defensive plays Wal-Mart(WMT) and Pfizer (PFE) ended higher.
Even though the Nasdaq Composite saw lighter selling than the broader markets, the index still tumbled below its November closing low to end at its worst closing level since March 2003. Tech heavyweights like BlackBerry maker Research in Motion (RIMM) plunged and other stocks like SteelDynamics (STLD) also tumbled.
Thursday's selling likely began overseas as China dashed some hopes it will lead the world out of the downturn. Chinese Prime Minister Wen Jiabao surprised Wall Street by declining to address any additional spending on top of the previously-announced $585 billion spending plan, sending basic materials and industrial stocks like Caterpillar (CAT) and U.S. Steel (X) tumbling.
Banks, GM Haunt Markets
Financial stocks were the biggest losers on Thursday, diving 9% to fresh lows. The financial jitters were underscored by shares of Citi, which plunged double-digits to all-time lows despite a lack of any corporate news.
Citi breaking $1 per share “indicates to the rest of the world that everyone feels the very existence of Citigroup is being questioned," Matt McCormick, vice president at Bahl & Gaynor Investment Counsel, told FOXBusiness.
Banks were hit by fierce selling after Moody’s warned late Wednesday it may slash its credit ratings on Wells Fargo (WFC) and Bank of America (BAC) and changed its outlook to negative on JPMorgan Chase (JPM).
The markets were also hurt by General Motors (GM), which said its auditor has expressed considerable doubts about its ability to continue as a going concern -- accounting speak for saying GM may not survive.While the disclosure was somewhat expected, the specter of liquidation clearly spooked Wall Street.
Markets Shrug Off Labor Data, Wal-Mart
Thursday's headlines weren't exclusively negative as the government said initial jobless claims fell by 31,000 to 639,000 last week, topping expectations but remaining near 26-year highs. All eyes Friday will be on the government's February jobs report, which economists expect will show the U.S. 650,000 jobs as the unemployment rate neared 8%.
There were a few bright spots in February's newly-released retail sales reports, led by a better-than-expected 5.1% jump in same-store sales for retail king Wal-Mart (WMT), which also upped its annual dividend by 15%. The other results were mixed as Target (TGT) exceeded expectations but other such as Gap (GPS) and Macy's (M) disappointed.
In the commodity markets, oil gave back part of Wednesday's big gains, tumbling $1.77 per barrel to $43.61. Gold jumped $21 per ounce to settle at $927, ending an eight-day slide.
Corporate Movers
Ford (F) saw its shares slide a day after unveiling a plan to slash its $25.8 billion in debt by 40% by offering new stock to bondholders, a move that will dilute common stock. Standard & Poor’s cut Ford's credit rating on the new plan, calling it “tantamount to a default.”
JPMorgan Chase (JPM) is close to reaching an agreement with Democratic senators that would accept a mortgage "cramdown" bill similar to the one that is set to be voted on in the House, sources tell FOXNews.
General Electric (GE) released a statement saying the company is safe and secure and sees no need to raise new capital. GE also shot down a rumor that it has $45 billion in commercial mortgage-backed securities that need to be written down.
Merrill Lynch continues to face fierce criticism about its 2008 compensation as the New York attorney general’s office subpoenaed seven execs who received tens of millions of dollars last year despite the company’s $27.6 billion net loss.
Bank of America (BAC)CEO Ken Lewis should be replaced to restore the bank's credibility, CtW Investment Group said in a new letter. Citing "disastrous missteps," the group said it will call on shareholders to vote against Lewis and others if he isn't removed before the bank's annual meeting.
U.S. Bancorp (USB) and Northern Trust (NTRS) have offered to return the billions in rescue funds they have received due to tougher restrictions on the use of the money, House Financial Services Chairman Barney Frank said, according to Dow Jones Newswires.
Anheuser-Busch InBev (AHBIF) suffered a 95% plunge in fourth-quarter net profit but the world’s largest beer maker posted a better-than-expected adjusted-profit $2.16 billion. The company unveiled plans to shed $7 billion of assets, cut costs by $1 billion, slash its dividend and suspend exec bonuses.
Target (TGT), the nation's second-largest discount retailer, said same-store sales fell by 4.1% in February, topping estimates.
Saks (SKS) said February retail sales dropped by 26% from a year ago, even worse than the 20.6% decline analysts expected from the luxury department store chain.
Family Dollar (FDO) rose sharply after the retailer boosted its second-quarter earnings guidance above the Street's view and said its same-store sales jumped 6.4%.
Macy’s (M) reported a steeper-than-expected 8.5% drop in February same-store sales.
Aeropostale (ARO) topped estimates with an 11% jump in same-store sales last month and said it continued to experience “positive reads” on its spring merchandise.
Abercrombie & Fitch (ANF) said February sales fell by 30%, much worse than the 19.8% decline expected by analysts.
Data Dump
The markets were also under pressure from a Labor Department report that showed non-farm productivity slowed considerably in the fourth quarter, unexpectedly falling 0.4%. The government also said unit labor costs jumped 5.7%, compared to expectations for a 0.4% decline.
The Commerce Department said U.S. factory orders tumbled by 1.9% in January, exceeding expectations for a 3.5% decline.
Global Markets
European markets fell for the fourth time of the last five days despite more rate cuts from central bankers there. The Dow JonesEuro Stoxx 50 sank 4.69% to 1852.25, London's FTSE100 fell 3.18% to 3529.86 and Germany's DAX plunged 5.02% to 3695.49.
Asian markets closed mixed. Tokyo's Nikkei 255 gained 1.95% to 7433.49 while Hong Kong's Hang Seng dropped 0.97% to 12,211.24. Australia's ASX200 rose 0.7% to 3188.50.
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