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S&P 500 Falls to Lowest Since Oct. 1996 After AIG Record Losses

U.S. Session Key Developments

  • AIG Reports Record $61.7 Billion Loss
  • Berkshire Hathaway Profits Plummet 96%
  • S&P 500 Dips Below 700, First Since Oct. 1996
  • General Electric May Lose AAA Credit Rating

S&P Falls to Lowest Since Oct. 1996 After AIG Record Losses

Stocks continued to take a beating after AIG reported the largest loss in U.S. history of $61.7 billion. Sentiment went into the open weighed down after Warren Buffet’s Berkshire Hathaway recorded its worst earnings in history after having seen profits plummet 96% in the fourth quarter. Indeed, in his accompanying statement as the head of Berkshire, Buffet stated that the economy would remain “in shambles” throughout 2009. Furthermore, investor confidence suffered from General Electric’s failed attempt to secure its AAA credit rating after it had slashed its dividend for the first time since 1938. On Friday, Moody’s stated that it was still reviewing the credit status of GE and that it would still consider cutting the rating of the Dow’s only original component. Overall the extremely negative sentiment being projected throughout the weekend saw traders sell in mass hysteria. At the end of it all, the S&P closed at its lowest level since October 1996 while the Dow closed below 7000 for the first time in nearly 12 years.

Dow 30              6763.29                  -299.64                      -4.24%
The Dow began the day in negative territory and remained there for the entire trading session. Every sector in the index finished the day bleeding with Materials and Financials performing the worst, decapitating each by -8.24% and -8.20%, respectively.

NASDAQ            1322.85                     -54.99                     -3.99%
The NASDAQ performed the best of the three major U.S. equity indices, losing slightly less than 4.0%. Surprisingly the sectors that lost the most were not the Financials, but rather Energy, which lost nearly 10% and Telecommunications Systems, which lost 9.43%

S&P 500              700.82                     -34.27                     -4.66%
The S&P was by far the worst performing index of three majors. It closed the day at its lowest level since October 1996 allowing the VIX volatility index to rise above 50 for only the second time in nearly two months after having jumped 13.6% to finish the day at 52.65

– LG


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