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Daily Blog -03/02/09- 2:39 P.M.


In like a Lion, March sends Dow under 6,900

The month of March begins with a global market slide. New fears over the crumbling economic landscape and no solution for the financial quagmire pushed most of the world's major stock market indices to 3.5% losses. America's S&P 500 index followed suit with a 3.5% decline and a breakdown to new multi-year lows. Nothing was spared. Not even gold futures were are up in today's sell-off.


German DAX... -3.4%
French CAC-40 -4.4%
English FTSE. -5.3%

Hong Kong Hang Seng -3.8%
Japanese NIKKEI.... -3.8%
Chinese Shanghai... +0.5%

Dow Jones Industrial -3.3%
NASDAQ Composite...  -3.1%
S&P 500 index......  -3.7%
Russell 2000 index.. -4.1%

Yet again it was all about the financials. HSBC, an international banking giant reported earnings today. The bank reported a loss and said they were closing 800 of its U.S. branches and cutting more than 6,000 jobs. HSBC was reducing their mortgage lending business. Management said they were raising another $17.7 billion in capital. The stock reacted with an 18% decline. The U.S. traded shares are down to $28.41.

American International Group, AIG, was the big story here in the states. AIG used to be the biggest insurer on the planet. Unfortunately, they had way too much exposure to the mortgage crisis. Last week it came out that AIG was poised to announce the biggest quarterly loss in U.S. history when they reported earnings today. Estimates were running at a loss of $60 billion. AIG missed those estimates with a $61.6 billion loss for the fourth quarter versus a $5.3 billion loss a year ago. The U.S. government still believes that AIG is too big to fail and poses a systemic risk. Thus the government is trying rescue attempt number three today with another $30 billion to prop up the insurer in an attempt to prevent AIG from seeing its credit rating downgraded. The U.S. has now committed more than $160 billion to saving AIG. The new deal today cuts the dividend AIG was paying on the government-owned preferred shares. At this point the U.S. taxpayer will own almost 78% of AIG.

Bad news from these financial companies and the ongoing uncertainty about how this financial crisis is going to end pushed the big name banks to serious losses. Citigroup was down another 17% to another new 18-year low. BAC was down 10% to $3.54. JPM is down 5%.

Monday's sell-off is very widespread. Nothing was spared except for the U.S. dollar. The rising dollar put extra pressure on commodities. Gold was probably showing the most relative strength with a 0.5% decline. The GLD gold ETF is still trading above $92. Oil was a different story. The front month futures contract for crude oil plunged more than 9% about $4.00 to $40.70 a barrel. Continuing fears over the global economy and falling demand weighed heavily on oil prices. The USO oil ETF lost 8.8% trading near $24.60.

Today's decline has pushed the Dow Jones Industrial Average under 6,900. It's been 11 years since the DJIA was trading under 7,000. It was October of 1996 the last time we saw the S&P 500 this low. The charts look ugly.

Chart of the DJIA:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Russell 2000:




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