Monday’s Market Recap: Stocks Tumble On Shocking News From AIG

With its first dip below the 7,000 mark in over eleven years, the market tumbled due to more shocking news out of already distressed AIG.  The Dow Jones Industrial Average (^DJI) fell sharply, down -4.24% to a close of 6,763.29 while the Nasdaq (^IXIC) and S&P (^GSPC) fell equally -3.99% and -4.66% respectively to a closes of 1,322.85 and 700.82.  Crude oil fell on the day -$4.68 to a close of $40.08 while gold also fell sharply down -$15.50 to a close of $927.

The recession in U.S. manufacturing persisted for a 13th month in February as sales dropped worldwide and factories cut jobs at the fastest pace on record.  The Institute for Supply Management’s factory index was 35.8, compared with 35.6 in January, in which readings less than 50 signal a contraction.  Other reports showed consumer spending rose in January with a spurt of post-holiday discounts, and construction dropped more than twice as much as anticipated.

American International Group Inc. (AIG), the insurer deemed too important to fail, will get as much as $30 billion in new government capital and relaxed terms on its bailout after posting the worst loss by any U.S. corporation.  The fourth-quarter loss widened to -$61.7 billion, or -$22.95 per share, from -$5.29 billion or -$2.08 in the year-earlier period.  The results brought AIG’s annual loss to almost -$100 billion, prompting the U.S. to offer a package of equity, new credit, and lower interest rates on existing loans designed to keep the company in business and prevent a new shock to the world’s financial system.

HSBC Holdings PLC (HBC) unveiled plans to curtail its hold in U.S. consumer lending by pulling back from key businesses, a move that comes as the British bank prepares to raise billions of pounds to shore up capital and possibly hunt for acquisitions.

Freddie Mac’s (FRE) chief executive officer, David Moffett, announced his resignation from the U.S. government-backed mortgage company just six months after being installed in that post by the company’s regulator as part of a rescue operation.

Disclosure: None

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