The Dow Jones industrial average today closed below the 7,000 mark for the first time in 12 years as U.S. stocks plummeted amid a global market sell-off tied to worries about the financial system.
The Dow closed down 299.64, or 4.24%, at 6,763.29; the S&P 500 fell 34.27, or 4.66%, ending at 700.82; and the Nasdaq composite closed down 54.99, or 3.98%, at 1,322.85. All numbers are preliminary.
This was the lowest close for the Dow since April 27, 1997, when the blue-chip index ended at 6,738.87. The S&P 500 index, the U.S. benchmark, was quoted at its lowest since 697.26 on Oct. 28, 1996, and was 54.5% below its record high of 1,565.15 Oct. 9, 2007. Analysts estimate the loss in U.S. market capitalization since that peak at more than $10 trillion.
The equity sell-off started overnight in Asia amid signs of a worsening economy. It continued in Europe amid concern over the debt situation of Eastern European countries and spilled into the U.S. session where American International Group required another $30 billion in government loans after reporting a record loss of $61.7 billion in the fourth quarter.
Financials were broadly lower as legendary investor Warren Buffetts Berkshire Hathaway reported a 96% drop in profits in the fourth quarter; HSBC, the largest European bank, said it needed to raise another $17.5 billion; and PNC Financial Services Group slashed its dividend to 10 cents from 66 cents to save capital.
The huge cash call from HSBC, the third bailout for AIG and the thumbs-down to Hungarys proposal for financial relief for former Eastern European communist countries are all enough reasons to boost risk aversion, said senior analyst Andrew Wilkinson at Interactive Brokers Group.