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 And the government's gross domestic product report showed that the economy fell at a 6.2 percent annual pace at the end of last year, a much faster than expected pace.
For investors, it all added up to a prolonged and increasingly painful recession.
"I don't think there is the confidence that the recovery is going to happen very quickly. It's going to take time," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.
Some analysts said the market's slide could have been worse - the major indexes finished well above their lows.
Dan Cook, senior market analyst at IG Markets in Chicago, said Wall Street's ability to show some recovery Friday despite the onslaught of bad news is a good sign.
"We have become somewhat callous to these news announcements," he said.
Nonetheless, the market's stats once again showed how troubled Wall Street and the economy are:
- The Dow, at its lowest close since May 1, 1997, is now down 50.1 percent from its record high of 14,164.53 reached in October 2007. It came within 34 points of 7,000, a level it hasn't fallen below since October 1997.
- The Standard & Poor's 500 index breached its Nov. 21 trading low of 741.02, which came during the height of the credit crisis. Friday's finish was the lowest for the index since Dec. 18, 1996.
- The Dow's 11.7 percent loss in February was its worst since 1933, when it fell 15.6 percent, and its sixth straight monthly drop. The half-year slide totals 38.8 percent, the worst since 1932, when it fell 45 percent.
The S&P 500 index fell 11 percent for the month. It was the second-worst February for the index, topped only by an 18.4 percent slide in 1933. It was the index's fifth monthly drop in six months; it managed a slender gain of 0.8 percent in December.
- The Dow Jones Wilshire 5000 index, which reflects nearly all stocks traded in America, lost 10.3 percent for the month, its worst slump since October. That's a paper loss of $1 trillion. Since its October 2007 peak, the Wilshire 5000 is down 52.7 percent, or $10.4 trillion.
The losses in the final session of the month came as Wall Street had been hoping that stabilizing Citigroup would help ease worries about the beaten-down bank stocks and remove some of their questions about the prospects for the industry.
But analysts said the loss to regular shareholders from the government's move touched off worries that other banks could see their shares hit as well.
Citigroup said before the opening bell that it agreed to a deal in which the U.S. government and private investors including the government of Singapore and Saudi Arabian Prince Alwaleed Bin Talal will convert their preferred stock in the struggling bank to common shares. The plan won't require additional money from the U.S. government, which holds an 8 percent stake in Citigroup and would own 36 percent.
"Citi has been a leading indicator the whole way down and the dilution that shareholders took today is sort of a leading indicator of what could happen to other banks, particularly the weak ones," said Kevin Shacknofsky, co-portfolio manager of the Alpine Dynamic Dividend Fund in Purchase, N.Y.
Some sort of deal with the government had been expected much of the week. But Citi fell 96 cents, or 39 percent, to $1.50 as investors worried about how much their holdings in the company would be diluted by the changes.
GE, meanwhile, said late in the session it would cut its dividend to save $9 billion a year. The conglomerate has a big financing arm, so it often trades like a bank stock. Its shares fell 59 cents, or 6.5 percent, to $8.51.
The Dow fell 119.15, or 1.7 percent, to 7,062.93. The S&P 500 index fell 17.74, or 2.4 percent, to 735.09, and the Nasdaq composite index fell 13.63, or 1 percent, to 1,377.84.
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 The Russell 2000 index of smaller companies fell 3.93, or 1 percent, to 389.02.
Two stocks fell for every one that advanced on the New York Stock Exchange. Consolidated volume came to a heavy 8.44 billion shares, up from Thursday's 6.48 billion.
Wall Street was also shaken when the government's gross domestic product report showed that the economy fell at a 6.2 percent annual pace at the end of last year, a much faster than expected pace.
The Commerce Department figures on GDP, the worst since an annualized drop of 6.4 percent in the first three months of 1982, cast some doubt that the economy will begin to show signs of improvement by the end of this year, as many analysts have predicted. But the poor showing also could make it that much easier for readings in coming quarters to look by comparison, Cook said. Investors would welcome even a slowing pace of decline.
Health care stocks, normally an area of safety in weak economies, fell for a second straight day Friday after the White House released a budget proposal Thursday that calls for cutting some health care spending.
"This creates a lot of weakness in this market because if the safe-havens are not safe anymore it could convince a lot of people to say
'You know, I don't kneed to be in this market right now. I can just go to cash,'" Shacknofsky said.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.02 percent from 3 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, was down at 0.25, compared with 0.26 percent from Thursday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 46 cents to settle at $44.76 a barrel on the New York Mercantile Exchange.
Britain's FTSE 100 tumbled 2.2 percent, Germany's DAX index fell 2.5 percent, and France's CAC-40 fell 1.5 percent. Earlier, Japan's Nikkei stock average rose 1.5 percent.
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The Dow Jones industrial average closed the week down 302.74, or 4.1 percent, at 7,062.93. The Standard & Poor's 500 index fell 34.96, or 4.5 percent, to 735.09. The Nasdaq composite index fell 63.39, or 4.4 percent, closing at 1,377.84.
The Russell 2000 index, which tracks the performance of small company stocks, declined 21.94, or 5.3 percent, to 389.02.
The Dow Jones Wilshire 5000 Composite Index - a free-float weighted index that measures 5,000 U.S. based companies
- ended at 7,415.60, down 386.67, or 5 percent, for the week. A year ago, the index was at 13,945.130.
[Associated
Press; By TIM PARADIS]
Copyright 2009 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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