All eyes were on American International Group (AIG) this morning, as the beleaguered insurance firm reported a fourth-quarter loss of $61.7 billion -- the largest quarterly loss on record for a U.S. corporation. With AIG's prospects looking bleaker than ever, the U.S. government announced plans to provide the company with an additional $30 billion in TARP funds. The government will also swap its preferred shares in AIG for common stock, allowing the insurance firm to save roughly $4 billion annually in dividend payments. Investors were quick to express their dismay at this news, and the Dow Jones Industrial Average plummeted beneath the psychologically critical 7,000 level with the sound of the opening bell.
The Dow Jones Industrial Average (DJIA 6,763.29) swallowed a massive daily loss of nearly 300 points, or 4.2%, as selling pressure swarmed the blue chips. The Dow tapped an intraday nadir of 6,755.17, marking its lowest price since April 1997. United Technologies (UTX) suffered the steepest percentage drop, followed closely by Citigroup (C). None of the Dow's 30 components closed higher, although McDonald's (MCD) escaped with just a fractional loss.
Not to be outdone, the S&P 500 Index (SPX 700.82) gave up 34 points, or 4.7%. Earlier, the SPX tapped an intraday low of 699.70, marking its first violation of the psychologically significant 700 level since October 1996. Finally, the Nasdaq Composite (COMP 1,322.85) shed 55 points, or 4.0%. The tech-rich COMP is inching consistently closer to potential support at 1,300, the site of its November 2008 lows.
Turning to equities in focus, PNC Financial Services (PNC) slashed its quarterly dividend by 85% ... Genentech, Inc. (DNA) failed to impress bullish bettors with its investors' day commentary ... Call volume accelerated on gold-related securities Ivanhoe Mines Ltd. (IVN) and Gold Fields Limited (GFI) ... Traders flocked to purchase put options on Occidental Petroleum (OXY) as crude prices collapsed ... Plains Exploration & Production (PXP) attracted unusual call volume after a rival firm announced production cuts ... and today's Quote of the Day comes from highly esteemed investor Warren Buffett, who used a rather grim metaphor to explain why the financial crisis spread so quickly:
"Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal diseases: It's not just whom you sleep with, but also whom they are sleeping with."
But these weren't the only headlines hitting the Street today. Click on the links below for our Daily Market Blog coverage of:
And, in case you missed it, Andrea Kramer explored bearish ratio backspreads in this week's installment of Advanced Options Strategies. Click here to watch the video.
For today's activity in crude oil, gold futures, options, and more, turn to page 2.
Crude futures fell in sympathy with U.S. stocks today, with the front-month contract swallowing its largest single-day percentage drop since Jan. 7. Black gold came under pressure as economic anxieties remained near fever-pitch levels, despite a better-than-expected reading from the Institute of Supply Management's manufacturing index. Elsewhere, a show of strength from the U.S. dollar served only to exacerbate the commodity's sell-off. By the close, crude oil for April delivery shed $4.61, or 10.3%, to finish at $40.15 per barrel.
Amid the bloodshed in the equities market, risk-averse traders today opted to stash their cash in the U.S. dollar, rather than gold futures. The greenback and the yen both capitalized on their safe-haven status, with the dollar extending its gains after better-than-expected data on personal income and personal spending. Meanwhile, gold futures were left to continue their 6-session losing streak. Gold for April delivery wrapped up the day on a drop of $2.50, or 0.3%, at $940 per ounce.
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