Wall Street tumbles anew in early trading (Change! Hope!)
NEW YORK (AP) -- Wall Street headed for another big drop Monday, one that could hurl the Dow Jones industrials below 7,000, after American International Group Inc. posted the largest quarterly loss in U.S. corporate history.
The government said it would give AIG another $30 billion in loans, in addition to the $150 billion it has already given the ailing insurer. AIG, which lost $61.7 billion in the fourth quarter, has been propped up four times now by the government.
Investors are worried about European financial companies, too. HSBC PLC, Europe's largest bank by market value, reported a 70 percent drop in 2008 profit and said it needs to raise $17.7 billion and cut 6,100 jobs.
Wall Street's concerns about how governments around the world will fix the financial system and global economy have sent stocks to their lowest levels in 12 years. The Dow Jones industrial average has dropped for six consecutive months, and fallen more than 50 percent from its October 2007 record high of 14,164.53.
Billionaire Warren Buffett wrote in his annual letter to investors Saturday he is sure "the economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond -- but that conclusion does not tell us whether the stock market will rise or fall."
Buffett said his insurance and investment company, Berkshire Hathaway Inc., had its worst year ever in 2008. The grim news from one of the world's most respected investors came a day after the Commerce Department said gross domestic product for the fourth quarter shrank at an annual rate of 6.2 percent.
Better-than-expected government data on Monday showing that personal spending rose 0.6 percent in January and incomes rose 0.4 percent helped stock futures pare losses. But the report was not enough to push stock futures into positive territory.
Ahead of the market's open, Dow futures tumbled 102, or 1.45 percent, to 6,950. Standard & Poor's 500 index futures sank 16.50, or 2.25 percent, to 717.70, and Nasdaq 100 index futures lost 19.75, or 1.77 percent, to 1,097.25.
"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. Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.
The "game-changer," he said, will be the housing market and whether it can stabilize.
The market will not be getting readings on the housing market Monday. But at 10 a.m. Eastern time, the Institute for Supply Management will release its manufacturing index for February.
Bond prices rose in early trading. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.95 percent from 3.02 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, was little changed at 0.25 percent.
The dollar was mostly higher against other major currencies, while gold prices fell.
Light, sweet crude fell $2.14 to $42.62 a barrel in electronic premarket trading on the New York Mercantile Exchange.
In Asian trading, Japan's Nikkei stock average dropped 3.81 percent and Hong Kong's Hang Seng index fell 3.81 percent. In afternoon trading in Europe, Britain's FTSE 100 fell 3.90 percent, Germany's DAX index fell 2.51 percent, and France's CAC-40 fell 3.24 percent.
