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Robin
Dow and S&P sink to '97 levels - Has this economy changed your spending? Are you worried?
by Robin
February 27, 2009 at 11:39 AM

Markets skid on news of Citi deal, worse-than-expected GDP report.
Two major gauges hit trading levels not seen in over 11 years.

 

NEW YORK (CNNMoney.com) -- Stocks tumbled Friday morning on news that the government will control a much bigger chunk of Citigroup and the economy suffered the worst decline in 26 years in the fourth quarter of last year.

Both news items added to bets that the recession will stretch on longer than has been expected.

The Dow Jones industrial average (INDU) lost 130 points, or 1.8%. The S&P 500 (SPX) index lost 16 points or 2%. Both the Dow and S&P 500 were at their worst intraday levels since 1997.

The Nasdaq composite (COMP) lost 6 points, or 0.5%

Citigroup (C, Fortune 500) and the Treasury Department announced a deal that would convert up to $25 billion in preferred shares held by the U.S. government into common stock. This would give the government control of as much as 36% of the beleaguered bank company.

Under the deal, Treasury will replace a majority of the board of Citigroup, but CEO Vikram Pandit and Chairman Richard Parsons will retain their positions.

Citi shares plunged 30% in early trading as investors interpreted the deal as a sign that another bank was "basically nationalizing," according to Todd Leone, head trader at Cowen & Co.

Bank stocks continue to be front and center as investors hope that the various plans to help the financial sector will work. But with few new details emerging, financial shares remain under pressure. Shares of Bank of America (BAC, Fortune 500) were 15% lower in market trading.

And on Thursday, the FDIC said its latest problem bank list had swelled to 252 - the highest since 1994.

Economy: At 8:30 a.m. ET, the government announced that GDP, the broadest measure of the economy, shrank by a revised annual rate of 6.2% in the fourth quarter. Economists surveyed by Briefing.com had expected a 5.4% decline.

After the opening bell, the National Association of Purchasing Management will release the Chicago PMI - a measure of the manufacturing industry in the Midwest, which is used as a gauge for the wider economy. The PMI is expected come in unchanged at 33 for February.

Companies: Ford Motor (F, Fortune 500) will reopen a plant in Cleveland that has been retooled to build more energy-efficient engines, Dow Jones reported. The move will create 250 jobs.

After the closing bell Thursday, computer maker Dell (DELL, Fortune 500) reported earnings and revenue that missed analyst expectations. The company also hiked its cost reduction target to $4 billion from $3 billion.

On Thursday, stocks fell as investors fretted about details of President Obama's budget outline. Obama unveiled the first version of his federal budget for the next 10 years, including an ambitious plan to reform health care, to be funded in part by hiking taxes on the rich. Healthcare stocks, including Merck (MRK, Fortune 500) and Pfizer (PFE, Fortune 500), fell on the news.

The Asian markets ended mixed Friday, with Tokyo's Nikkei index gaining 1.5%. The European indexes were lower in morning trading.

Oil and money: Oil prices fell $1.75 a barrel to $43.47. The dollar fell against the yen and was little changed versus the euro. To top of page

Replies

  • mushmom
    by mushmom
    February 27, 2009 at 11:54 AM

    I'm definately worried.  dh works for a company that is for the 2nd time so far this year asking for volunteers to take a buyout.  my friend's dh just got hit with a 20% paycut.  thank goodness gas prices came down.  dh and I were going to buy a new stove and fridge with our tax refund but decided to put it in savings instead just in case.

  • morningdove831
    February 27, 2009 at 11:56 AM

    I'm a little worried, yes.  I've cut back on spending and we don't eat out as much as we used to.  I'm a single mommy, so my child depends totally on my income.  I watch every penny anyway, but in this economy, those pennies are being squeezed a little tighter.   

  • caitandcarasmom
    February 27, 2009 at 12:04 PM

    Naturally, I am worried about my husband's jobs.  One is with a bank and with the way things are looking, banks may be making some serious cuts.  Thankfully, he's in IT and they'll always need someone to fix the computers and he's been crazy busy, so I'm not too worried, yet.  His other job is with a company that does the captioning on television.  My husband really thinks that he will not have a job after May of this year.  To save money, the television stations are going to some voice-recognition software so that they don't have to pay the captioners.  No captioners means no need for tech support.  If my husband loses this job, we're in trouble.  Night work is hard to come by, especially jobs that pay what this one does.

    Otherwise, we are trying to be frugal.  I am doing my grocery shopping based on store ads, we are not eating out as much and are doing without some things.  I am really afraid that our rent will go up again this summer since the housing market is still doing so poorly.  We can't afford another increase!

  • sweetie00
    February 27, 2009 at 12:09 PM

    Yes, I worry, but I'm not scared. My GPs lived thru the Great Depression and they survived and passed on to me some great lessons. I believe the economy is cyclical. If we haven't hit bottom yet, we will, and then there is only one way to go after that.......

  • cmarielin
    February 27, 2009 at 12:16 PM

    Yep - worried.  I wasn't at first, since I've been in school to be in the medical field.  Now I'm graduating in two weeks, and hearing that even the medical field is seeing cut backs.  Guess it makes sense - people lose jobs, they lose their insurance, then they either don't go to the doctor or they go and don't pay.  I should have seen that coming.

    Hubby's work is still doing fine - he has a trade, and over 20 years of expert experience; so if there are any jobs available, he gets first dibs.  I'm thankful for that.

    We're certainly spending a lot less.  Using coupons on occasion, hubby hunts and I'm starting a garden this year.  I've got a few "trades" of my own up my sleeve - if worse comes to worse, I'm not opposed to trading goods for goods, like in old fashioned markets.  At least that would be tax free.

    I don't know what the future holds, but I am concerned about it.

  • dr_m
    by dr_m
    February 28, 2009 at 9:50 AM

    Yes I am worried, and definitely cutting spending, but i won't panic.. it's  not worth it. we just have to do what we must, we will get through it...

     

    I dont follow stocks, but thought this was interesting about citigroup, they tried to buy Wachovia bank, but lost their bid....  so anyway, i am glad that we are getting something for our money we spent to hellp them..  eg, part ownership  ..

    Citigroup (C, Fortune 500) and the Treasury Department announced a deal that would convert up to $25 billion in preferred shares held by the U.S. government into common stock. This would give the government control of as much as 36% of the beleaguered bank company.

    Under the deal, Treasury will replace a majority of the board of Citigroup, but CEO Vikram Pandit and Chairman Richard Parsons will retain their positions.

     

     

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