S&P 500 Closes at Worst Level Since '96
Updated from 4:25 p.m. EST
Stocks in New York closed just barely lower Tuesday, but that was enough to leave the
S&P 500
at a level not seen for more than 12 years.
The S&P fell 4.49 points, or 0.6%, to 696.33, its first finish below 700 since October 1996. The
Nasdaq
settled down 1.84 points, or 0.1%, at 1321.01. Led by a 7.8% loss in
General Electric
(GE) - Get Report
and a 5.2% decrease in
Home Depot
(HD) - Get Report
, the
Dow Jones Industrial Average
declined 37.27 points, or 0.6%, to 6726.02.
Bargain-hunters emerged early following the selloff a day ago, but their interest faded into midsession. However, stocks rallied again in the afternoon before slipping back in the final hour.
Bank of America
(BAC) - Get Report
, at one point one of the day's best performers, pared its gain to 2 cents a share after
downgraded it. The stock closed at $3.65.
Meanwhile, traders had their eyes on Washington as
Federal Reserve
Chairman Ben Bernanke and Treasury Secretary Tim Geithner spoke before elected officials. Geithner defended the proposed
$3.6 trillion budget
that seeks to reduce the federal deficit to $533 billion by 2013, and warned of the consequences of not reducing the deficit.
Geithner also noted that the budget, in contrast with those in the past, includes the likely future cost of foreign wars and natural disasters, along with "the potential need for more resources to address this crisis."
The Fed said in a statement earlier that it's prepared to launch the Term Asset-Backed Securities Loan Facility, which could boost lending by $1 trillion. The program will start distributing funds on March 25 and is slated to run through December.
It is designed to revive lending for automobile loans and leases, credit card loans, student loans, and small business loans guaranteed by the Small Business Administration, writes Tony Crescenzi, chief bond strategist for Miller Tabak and a
RealMoney.com
contributor.
"If it works, a swath of economic data will be impacted, probably by the end of the second quarter or early in the third quarter, altering perceptions about the economy and boosting household, business, and investor sentiment."
January and February data on the housing and auto industries offered another retrospective look at the course and severity of the economic recession. The National Association of Realtors reported that pending home sales were down 7.7% between December and January and worse by 6.4% year over year.
"Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales," said Lawrence Yun, NAR chief economist, "We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit."
reported sharp declines in February sales as consumers continued to steer clear of vehicle purchases.
Toyota's
(TM) - Get Report
sales dropped 40%, while
Ford's
(F) - Get Report
sales fell 48%.
GM
(GM) - Get Report
said its sales slid almost 53%, and Chrysler's fell nearly 42%.
Ford also said it will slash second-quarter
production
by 38%.
Struggling automakers continue to turn to governments for help as the industry dramatically restructures to deal with the global slump.
confirmed that its financing unit is in discussions on a possible loan with a Japanese backed bank that was set up last year to help cash-strapped businesses. The unit could reportedly ask for $2.05 billion in loans, according to various reports.
In other auto news,
The Wall Street Journal
reported that
-- itself the recipient of a $13.6 billion loan from the U.S. Treasury -- is buying
Delphi's
global steering business.
For the day, GM was down 1% to $1.99. Ford lost 3.7% to $1.81, and Toyota added 0.6% to $61.01.
Stocks took a beating Monday, with financials leading the Dow under 7000 for the first time since 1997.
Investors didn't cheer news that the U.S. government would extend another $30 billion in loans to
American International Group
(AIG) - Get Report
after the firm posted a quarterly loss of $61.7 billion. The new capital comes after $150 billion of taxpayer aid already given to AIG.
"We're not doing this to bailout AIG, we're doing this to protect our financial system," said Bernanke Tuesday, saying no situation has made him more angry "than the one at AIG."
"We're dealing with the largest insurance company in the world," he said."Its failure would send shockwaves through the insurance industry."
On the heels of that news, the former longtime chief executive of AIG, Maurice "Hank" Greenberg, is now suing the company, arguing that the struggling insurer
misled investors
about its exposure to subprime mortgages. AIG shares tacked on 2.4% to 43 cents a share in the session.
The government has also recently substantially upped its stake in struggling bank
Citigroup
(C) - Get Report
. In an update there, Citi is looking to create joint ventures with third parties as a way of shedding noncore assets -- such as CitiFinancial, CitiMortgages, Primerica, Japanese brokerage Nikko Cordial and the bank's private-label credit card business -- instead of selling them outright, according to a report in the
New York Post
. Citi's shares were up 1.7% at $1.22.
Stocks abroad were again widely lower. The FTSE in London and the DAX in Frankfurt gave up 3.1% and 0.5%, respectively. Hong Kong's Hang Seng and Japan's Nikkei lost 3.8% and 3.9%.
In commodities, oil rose $1.50 to settle at $40.65 a barrel, after falling $4.61 on Monday, while gold lost $26.40 to $913.60 an ounce.
Longer-dated Treasuries fell. The 10-year note was losing 15/32 to yield 2.90%, and the 30-year was lower by 29/32, yielding 3.70%. The dollar was weaker against the yen and stronger against the pound and euro.
