The Dow Jones industrial average fell to an 11-year low on Monday as investors dumped shares on uncertainty about the latest potential U.S. government action to shore up beleaguered banks.
Making matters worse, worries about a fall-off in business and consumer spending on technology hurt the biggest names in the tech sector. IBM
Investors had initially welcomed reports the government could convert an earlier investment in Citigroup
Worries on earnings expectations for 2009 also contributed to the sell-off.
The market seems to be discounting the government's latest actions to the banking sector, said Scott Fullman, director of derivative investment strategies at broker-dealer WJB Capital Group in New York.
While the financial sector is mixed, other groups are driving the blue chip benchmark to a new 11-year low and momentum appears to be following the downward trend of the past four weeks. he added.
The Dow fell as low as 7,188.77, its lowest intraday level since October 1997.
About $10 trillion of value in U.S. stocks has been wiped out since the market's record high close in October 2007.
The Dow Jones industrial average <.DJI> fell 140.26 points, or 1.90 percent, to 7,225.41. The Standard & Poor's 500 Index <.SPX> slid 16.39 points, or 2.13 percent, to 753.66. The Nasdaq Composite Index <.IXIC> tumbled 35.95 points, or 2.49 percent, to 1,405.28.
The S&P 500 fell below its lowest closing level in 12 years.
Fears that some major U.S. banks could be nationalized continued to drag on sentiment on Monday, but stocks came off lows after the White House reiterated that a privately held banking system regulated by the government was still the best way to operate.
Citigroup and Bank of America
In another blow to techs, Morgan Stanley downgraded its PC sales forecasts for 2009 and 2010, citing lower prices and weaker-than-expected demand for PCs given the rising sales of netbooks, which are cheaper, no-frills notebook computers.
Dow component General Electric
A more than 10 percent decline in shares of U.S. Steel Corp
(Additional reporting by Doris Frankel; Editing by Leslie Adler)