NEW YORK - A relentless sell-off in the stock market Monday blew through barriers that would have been unthinkable just weeks ago, and investors warned there was no reason to believe buyers will return anytime soon. The Dow Jones industrial average plummeted below 7,000 at the opening bell and kept driving lower all day, finishing at 6,763 - a loss of nearly 300 points. Each of the 30 stocks in the index lost value for the day.
And the Standard & Poor's 500 stock index, a much broader measure of the market's health, dipped below the psychologically important 700 level before closing just above it. It hadn't traded below 700 since October 1996.
Investors were worried anew about the stability of the financial system after insurer American International Group posted a staggering $62 billion loss for the fourth quarter, the biggest in U.S. corporate history - and accepted an expanded bailout from the government.
But beyond daily headlines, Wall Street seems to have given up the search for a reason to believe that the worst is over and the time is ripe to buy again.
"As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading, who said he believes the Dow might fall to 5,000 and the S&P to 500.
The Dow's descent has been breathtaking. It took only 14 trading sessions for the average to fall from above 8,000 to below 7,000. For the year, the Dow has lost 23 percent of its value.
Its last close below 7,000 was May 1, 1997 - a time when the market was barreling to one record high after another because of the boom in technology stocks, but often suffered big drops as investors worried about inflation and rising interest rates.
This time around, Wall Street analysts seem to believe that a stock market recovery will first require signs of health among financial companies, and on Monday those signs seemed further away than ever.
AIG, whose reach is so vast that the government warns letting it fail would cripple the very world financial system, will get another $30 billion in loans on top of the $150 billion already invested by the government.
HSBC PLC, Europe's largest bank by market value, said it needs to raise about $18 billion, reported a 70 percent drop in earnings for last year, and announced plans to scale back U.S. lending and cut 6,100 jobs.
The banking sector helped drive the market lower. Citigroup stock lost 20 percent of its value and fell to a paltry $1.20 per share. HSBC lost 19 percent. Bank of America lost 8 percent.
While the root of the problem for the financial firms is the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems, forcing job cuts.
"The economy definitely has deteriorated since November," said Sean Simko, head of fixed income management at SEI Investments. "It's just the fact that we haven't seen signs of improving or stabilizing, per se, which is adding to the morass of the market."
Mixed economic readings provided little reason to expect a turnaround. Personal spending and incomes both rose for January, but construction spending fell 3.3 percent, more than twice what economists expected.
And coming later this week is much bigger, and more unnerving, data. The government on Friday will report the national unemployment rate and job losses for February. Those figures have been worse month after month.
So far, the economic readings and news coming out of financial companies are still so alarming that investors feel no alternative but to sell.
"I don't think we find a bottom in the market until we see some sort of increased level of optimism and confidence among consumers and investors," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.
Both the Dow and the S&P have lost more than half their value since the market peaked in October 2007. In that time, about $11 trillion in wealth has vanished, according to the Dow Jones Wilshire 5000 index, which tracks nearly all stocks traded in America.
Last week, the Dow and the S&P 500 fell below the levels they had reached Nov. 20 and 21 - to that point their lowest since Lehman Brothers imploded in September and set off the financial meltdown.
Investors had hoped those levels might mark a market bottom, but it hasn't happened.
Big-name investors are just as cautious. Billionaire Warren Buffett predicted in his annual letter to investors Saturday that "the economy will be in shambles throughout 2009 - and, for that matter, probably well beyond." He cautioned that did not determine whether the market would rise or fall.
And even when the market finally reaches a bottom, it probably faces a long, long recovery.
"We do feel that things can improve, but it is going to be years before we get back to levels we saw in the markets a year ago," said David Chalupnik, head of equities at First American Funds.
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