Small caps close down 4%
Battered stocks limped to a dismal Monday close, with the Dow and S&P 500 falling to levels seen in 1997 as investors continue to pull money out on decreased confidence.
“People left and right are throwing in the towel," Keith Springer, president of Capital Financial Advisory Services, told the Associated Press.
The Russell 2000 (NYSE:IWM) closed down 16.38, or 3.99%, to $394.58, while the Dow fell 3.4% to close at a staggering 7,114.94, and the S&P 500 tumbled 3.47% to end the day at 743.33. For the year, the Russell is now down 21%, the Dow is down 18.93% and the S&P 500 is down 17.7%.
News out today that the Treasury Department would start a new, revamped bank bailout program that would include the option of allowing the government to increase its ownership in financial institutions did little to support investor confidence.
Although the Obama administration doused rumors last week of a potential plan to nationalize banks, the Treasury said today that beginning on Wednesday, the 20 largest U.S. banks will be required to undergo a new “stress test.” The government test will determine whether each institution has enough capital to survive any further economic spirals. More details surrounding the stress test will be released on Wednesday by the Treasury, though it did divulge today that if any banks fail the test, the government will require it to raise capital from private sources. If any bank is incapable of raising the money, the bank will be required to swap out the government’s existing, non-voting preferred shares and replace them with new preferred shares that are convertible to common stock with voting rights.
The decreased confidence today badly bruised small-cap bank stocks, including Shore Bancshares, Inc. (Nasdaq:SHBI), down over 17%, First Bancorp (Nasdaq:FBNC), down 17%, and Wilshire Bancorp, Inc. (Nasdaq:WIBC), which fell over 12%.
Tech stocks were also getting pummeled today after The Wall Street Journal reported that Yahoo’s (Nasdaq:YHOO) new CEO is planning a companywide reorganization.
The technology-laden Nasdaq composite index dropped 2.41%, and large-cap tech slid. Among those were Hewlett-Packard Co. (NYSE:HPQ), down 5%, and Intel Corp. (Nasdaq:INTC), down 5.2%. Small-cap tech stocks feeling the heat were TechTarget (Nasdaq:TTGT) and Bruker Corporation (Nasdaq:BRKR), which both fell about 13% each, and Switch & Data Facilities (Nasdaq:SDXC) and FuelCell Energy (Nasdaq:FCEL), which both saw losses of about 12% each.
In other market news, crude oil fell $1.90 to $38.18 per barrel despite reports that OPEC had slashed production, bond prices were mixed, and gold prices fell $6.50 to $995.70.
