Monday’s Market Recap: Stocks Dip To 1997 Levels

Growing uneasiness that the current recession has no end in sight has once again pushed the market lower to levels that have not been seen since 1997.  The Dow Jones Industrial Average (^DJI) has fell yet another -3.41% to a level of 7,114.78 while the Nasdaq (^IXIC) and S&P (^GSPC) fell equally -3.71% and -3.47% respectively to closes of 1,387.72 and 743.33.  Gold fell -$9.20 on the day to a close of $993 while crude oil also fell -$1.99 to a close of $38.04 despite the news that the Organization of Petroleum Exporting Countries had made good on a pledge to cut production by more than 4 million barrels per day.

Citigroup Inc (C), the United States’ third largest bank, is currently in talks with federal regulators about increasing their stake in the troubled bank.  One of their possible options is by converting $45 billion of preferred stock into common stock.  This week the government plans to subject banks with more than $100 billion of assets to stress tests to decide which need more capital.  Citigroup ended 2008 with $1.95 trillion of assets.  American International Group Inc (AIG) is in discussions with the U.S. government on securing additional funds.

President Barack Obama said Monday he would begin distributing $15 billion within the states during the next two days to help them with Medicaid payments to the poor.  The recession has had a huge impact on state budgets, and one area public officials are struggling with is in meeting costs in the Medicaid program for the poor.  The program is underwritten jointly by states and the federal government.

American Express Co (AXP), battered by mounting credit card losses, is offering $300 to a limited number of U.S. card holders who pay off their balances and close their accounts.  The firm is cutting expenses, aiming to save $1.8 billion in 2009 through different ways that they can manage credit risk based on the costumers overall credit profile.

Genentech Inc. (DNA) received Roche Holding AG’s (ROG) $86.50-a-share hostile takeover, responding today to the Swiss drugmaker’s bid for the remaining 44% percent of the biotechnology company it doesn’t already own.  In August Genentech rejected Roche’s original $89-a-share offer as too low and advised shareholders on Feb. 9th to ignore a lowered $86.50-a-share, or $42.1 billion, bid.  Roche reduced the offer after South San Francisco, California-based Genentech said during discussions that it wanted $112 a share.

Disclosure: The mutual fund the author manages is long DNA.

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