Fears over bank nationalization drive markets to big losses; Dow drops 100 points
It'd be an understatement to say it was a tough week in the markets. In fact, the Dow, which has lost 6.2 percent since the start of trading on Tuesday, hasn't seen a week this bad since October. The S&P 500 fared even worse, losing 6.9 percent this week.
Bank stocks' wild ride capped a difficult day for investors.
Reports from Washington stoked fears that some of the nation's largest financial institutions might be taken over by the government. Bloomberg News reported that Senate Finance Committee Chairman Christopher Dodd (D-Conn.) said it was "possible" that the government could nationalize some banks "for a short time" in response to the financial crisis. That crushed shares of Citigroup (C) and Bank of America (BAC), which have already received $90 billion in capital injections from the Treasury Department.
Both banks recovered somewhat after White House press secretary Robert Gibbs said President Obama and his advisers "strongly believe that a privately-held banking system is the correct way to go." But while Bank of America sustained its rally, closing down just 3.6 percent at $3.79 after falling nearly 35 percent earlier in the day, Citigroup could not. It fell 22.3 percent to close at $1.95.
Concern over the health of General Electric (GE) forced the company's stock down, and it closed below $10 for the first time since 1995. The company's finance arm is facing a steep drop in profitability, analysts at investment bank Sanford C. Bernstein & Co. predicted.