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Bank, GM worries add to investor uncertainty

Dow sinks to lowest close since April 2007; jobless report may increase fears

By Walter Hamilton | Tribune Newspapers

March 6, 2009

Stock prices sank Thursday to new bear-market lows on renewed worries about the country's banks and about General Motors Corp.

Friday may bring still more volatility, as many analysts expect the employment report for February to show significant job losses.

The market opened lower Thursday and fell throughout the day, with the Dow Jones industrial average sagging 281.40 points, or 4.1 percent, to 6594.44, falling below the nearly 12-year low it set Tuesday and reaching its lowest close since April 1997. Thursday's decline marked the second time this week that the blue-chip barometer fell nearly 300 points.

The Standard & Poor's 500 dropped 30.32 points, or 4.3 percent, to 682.55, its lowest level since September 1996.

The Nasdaq composite index, which has been the most resilient of the major indexes, sank 54.15 points, or 4 percent, to 1299.59, falling under its previous bear-market low set in late November.

The sell-off continued a pattern in which investors grow ever-more despondent about the prospects for an economic recovery and seem to simply give up on stocks.

"It's pretty ugly," said Art Hogan, chief market strategist at Jefferies & Co. "Everybody's selling everything."

Thursday'sdecline more than erased the Dow's 149-point rally Wednesday, which broke a five-day losing streak as investors speculated that China would unveil more government spending to stimulate its economy. But in a speech at the opening of a national legislative meeting, Chinese Premier Wen Jiabao suggested no new stimulus spending was necessary.

On Wall Street, financial stocks led the decline; an index of 24 bank stocks slid 12 percent.

Citigroup, at one time the world's the most richly valued banking firm, dipped into penny-stock status as its shares sank as much as 14 percent, to 97 cents, during trading.

Although the stock recovered to close at $1.02 a share, down 11 cents, it still traded for less than those of General Motors, even though GM's stock dropped 34 cents, or 15 percent, to $1.86 after its auditor said the beleaguered carmaker might not be able to survive as a going concern.

"Citigroup going below a buck … was a little scary," said Mark LeStrange, director of sales at Source Trading. "To say that we're cheap here and it's a good value, it sounds right, but in all reality we could go 50 percent lower," he said. "Nobody has any idea how low we can go."

Los Angeles Times; The Associated Press contributed to this report.