S&P plummets to 11-year low on bad reports

Strategist cites 'fear' for drop

By BLOOMBERG NEWS | Friday, November 21, 2008

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The Standard & Poor's 500 Index plunged to its lowest level in 11 years after economic reports depicted a deepening recession and lawmakers postponed a vote on a plan to salvage the auto industry.

The S&P 500 extended its year-to-date tumble to 49 percent, poised for the worst annual decline in its 80-year history. Chesapeake Energy and National-Oilwell Varco sank more than 21 percent after crude fell to a three-year low on concern that the slumping economy will crush demand. JPMorgan Chase lost 18 percent and Citigroup dropped 26 percent as concern the recession will trigger more bankruptcies pushed the cost of insurance against corporate defaults to an all-time high.

"We're just trying to stay away from the window," said James Paulsen, chief investment strategist at Wells Capital Management. "This isn't about fundamentals; it's not about bad balance sheets; it's about fear and confidence."

The S&P 500 slid 6.7 percent to 752.44, under the low of 776.76 reached during the bear market in 2002. The Dow Jones Industrial Average sank 444.99 points, or 5.6 percent, to 7,552.29. The Nasdaq Composite decreased 5.1 percent to 1,316.12.

The S&P 500 extended its plunge from an October 2007 record to almost 52 percent in the worst bear market since the Great Depression. Concern that the recession is worsening was spurred after jobless claims approached the highest level since 1982, the index of leading economic indicators fell for a third time in four months and the Federal Reserve said manufacturing in the Philadelphia area shrank at the fastest pace in 18 years.

Seventeen companies in the S&P 500 lost more than one-fifth of their market value today.

Chesapeake, a producer of oil and natural gas, lost $5.32 to $13.98. National-Oilwell, which makes energy production equipment, retreated $4.86 to $17.86.

Crude oil fell 7.5 percent to $49.62 a barrel, its lowest settlement since May 2005. Energy shares declined the most among 10 industries in the S&P 500, losing 11 percent collectively.

Exxon Mobil fell the most in a month, losing $4.91, or 6.7 percent, to $68.51.

JPMorgan, the largest U.S. bank by market value, lost $5.09 to $23.38, its lowest price since March 2003. Citigroup sank $1.69 to $4.71, an almost 14-year low.

Goldman Sachs, once the biggest and most profitable U.S. securities firm, fell below its initial public offering price of $53, wiping out 10 years of gains. Goldman lost $3.18, or 5.8 percent, to $52.

Life insurance stocks slumped for a fifth straight day on concerns that falling equity markets will cause losses on retirement products.

The S&P 500 Financials Index sank 11 percent to its lowest level since July 1995.

Alcoa had the third-steepest decline in the Dow after Citigroup and JPMorgan, losing 16 percent to $6.85. Aluminum dropped the most in three years and copper fell to a three-year low in London.

"It's probably going to take another year for things to calm down, for people to feel a little more comfortable with the economy," said Russell Rolnick, senior vice president for Lenox Advisors Inc., which oversees more than $1 billion in New York. "People these days seem to be more interested in capital preservation than appreciation."

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