Stocks, led by banks, fall 4%

January 21, 2009|By Los Angeles Times

NEW YORK - As if to underscore the daunting financial mess confronting President Barack Obama, a fresh plunge in banking stocks yesterday dragged the stock market to its worst loss of the new year.

The Dow Jones industrial average tumbled more than 300 points as it, and other major stock indexes closed at their lowest levels since Nov. 20, the day that has marked the bottom of the bear market that began more than a year ago.

The sell-off, triggered by anxiety about the depth of the banking crisis and its effect on the economy, raised fear that stocks might skid below that November trough.

The Dow skidded 332.13 points, or 4 percent, to 7,949.09, its worst performance ever on the day of an inauguration.

The Dow now is fewer than 400 points above its Nov. 20 close.

The Standard & Poor's 500 index slumped 44.90 points, or 5.3 percent, to 805.22. The index is down 11 percent in 2009 - its worst-ever start to a year. The Nasdaq composite index shriveled 88.47 points, or 5.8 percent, to 1,440.86.

An index of financial stocks in the S&P 500 crumbled 17 percent, the biggest drop in its 20-year history, surpassing a 16 percent decline that occurred Nov. 21. An index of 24 bank stocks gave up 20 percent.

Bank of America shares tumbled 29 percent after analyst Paul Miller at Friedman Billings Ramsey predicted the bank would have to raise at least $80 billion in new capital. Wells Fargo & Co. slid 24 percent after Miller said the company might slash its dividend.

The latest phase of the bank sell-off began after New Year's Day and intensified last week when Citigroup and Bank of America reported huge fourth-quarter losses and the government invested an additional $20 billion in Bank of America.

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