Markets slide after deal between U.S., Citigroup
The agreement stirred worries about other banks' stocks. Also, the GDP fell faster than expected.
NEW YORK - Wall Street ended another unforgiving month with a steep loss - one that left the Dow Jones industrial average at less than half its record high.
The day's news unsettled investors. Citigroup Inc. agreed to turn over a big piece of itself to the government, a move that fanned worries that other banks would face crippling trouble with bad debt. General Electric Co. slashed its quarterly dividend by 68 percent. Both companies are components of the Dow Jones industrial average, which fell 119 points.
And the government's gross domestic product report showed that the economy fell at a 6.2 percent annual pace at the end of last year, much faster than expected.
The Dow, at its lowest close since May 1, 1997, is now down 50.1 percent from its record high of 14,164.53 reached in October 2007. It came within 34 points of 7,000, a level it hasn't fallen below since October 1997.
The Standard & Poor's 500 index breached its Nov. 21 trading low of 741.02, which came at the height of the credit crisis. Yesterday's finish was its lowest since Dec. 18, 1996.
The Dow's 11.7 percent loss in February was its worst since 1933, when it fell 15.6 percent, and its sixth straight monthly drop. The half-year slide totals 38.8 percent, the worst since 1932, when it fell 45 percent.
The S&P 500 index fell 11 percent for the month. It was its second-worst February, topped only by an 18.4 percent slide in 1933. It was the index's fifth monthly drop in six months.
The losses came as Wall Street had been hoping that stabilizing Citigroup would ease worries about the beaten-down bank stocks and remove some questions about prospects for the industry. But analysts said the loss to regular shareholders from the government's move touched off worries that other banks could see shares hit.
Citigroup said before the opening bell that it agreed to a deal in which the U.S. government and private investors, including the government of Singapore and Saudi Prince Alwaleed Bin Talal, would convert their preferred stock in the bank to common shares. The deal will not require additional money from the U.S. government, which holds an 8 percent stake in Citigroup and would own 36 percent.
Some sort of deal with the government had been expected. But Citi fell 96 cents, or 39 percent, to $1.50 as investors worried about how much their holdings would be diluted.
GE, meanwhile, said late in the session that it would cut its dividend to save $9 billion a year. Its shares fell 59 cents, or 6.5 percent, to $8.51.
The Dow fell 119.15, or 1.7 percent, to 7,062.93. The S&P 500 index fell 17.74, or 2.4 percent, to 735.09, and the Nasdaq composite index fell 13.63, or 1 percent, to 1,377.84. The Russell 2000 index of smaller companies fell 3.93 to 389.02.