Dow Average Tumbles To A Six-Year Low

By: CBS News
By: CBS News
Financial and tech stocks lead the decline; banks are still leaning heavily on the Fed for help.

Specialist Gregg Maloney, right, directs trading at his post on the floor of the New York Stock Exchange Tuesday morning Jan. 22, 2008. Wall Street plunged at the opening of trading Tuesday, propelling the Dow Jones industrials down about 300 points after an interest rate cut by the Federal Reserve failed to assuage investors fearing a recession in the United States. (AP Photo/Richard Drew)

WALL STREET - The Dow Jones industrial average tumbled to its lowest close in more than six years on Thursday as sharp declines in key financial shares led the market lower.

The blue chips broke through a psychological barrier established in November to close at their lowest level since Oct. 9, 2002, the last bear market low.

The feeble performance marks a setback for many investors who hoped the Nov. 20 finish would mark the low point of the market's extended decline from its October 2007 highs.

The market's inability to rally also signals that investors see no immediate end for the recession, which is already 14 months old and one of the most severe in decades.

The Dow had been threatening to break through the November bottom since Tuesday, when the index tumbled 300 points on worries about the economy and the stability of banks in Eastern Europe. Stocks had barely held the November low on Tuesday and Wednesday.

On Thursday, persistent worries about financial and technology stocks weighed on the market, with steep dropoffs in financial bellwethers like Citigroup and Bank of America leading the way downward. Both stocks ended down about 14 percent.

The Dow lost 89.68, or 1.2 percent, to end at 7,465.95. It was the lowest finish since October 2002.

Broader indexes also fell. The Standard & Poor's 500 index ended down 9.48, or 1.20 percent, to 778.94, but finished above its Nov. 20 low of 752.44.

The technology-heavy Nasdaq composite index suffered the biggest hit Thursday after Hewlett Packard Co. tumbled 7.9 percent after posting worrisome results. The Nasdaq fell 25.15, or 1.71 percent, to 1,442.82.

Crude Prices Up On Lower Inventories

Oil prices jumped Thursday as new government data showed oil inventories fell unexpectedly and that consumption of gasoline and other petroleum products may be starting to edge higher.

Light, sweet crude for April delivery rose 7 percent, or $2.77, to settle at $40.18 per barrel on the New York Mercantile Exchange. The vast majority of trades have shifted to the April contract with the March contract expiring Friday.

Benchmark crude for March delivery surged 14 percent, or $4.86, to settle at $39.48.

Even with the decline, crude supplies remain ample and U.S. oil storage sites, including the main depot in Cushing, Okla., are brimming with crude. Storage levels are nearing levels last seen in the summer of 1990 when Iraq invaded Kuwait.

A stunning drop-off in driving by Americans has led to growing levels of gasoline in storage.

Total gasoline inventories rose 1.1 million barrels last week, or 0.5 percent, to 218.7 million barrels compared with analyst projections of a decline of 1 million barrels.

More Borrowing From Fed

The Federal Reserve reported that commercial banks averaged nearly $66 billion in daily borrowing over the week ending Wednesday. That was up from nearly $64.6 billion in average daily borrowing logged over the week that ended Feb. 11.

Investment firms drew $26 billion over the past week from the Fed program. That was up slightly from an average of $25.8 billion the previous week. This category includes any loans that were made to the U.S.- and London-based broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley and Bank of America Corp.'s Merrill Lynch.

The Fed's net holdings of "commercial paper" averaged $250.4 billion over the week ending Wednesday, a decrease of $5.8 billion from the previous week. It was the fourth straight week that such holdings declined, a positive development that suggests companies are relying less on the Fed for short-term financing needs, economists said.

The first-of-its-kind program started on Oct. 27, a time of intensified credit problems. At that time, the Fed began buying commercial paper - the crucial short-term debt that companies use to pay everyday expenses. The Fed has said about $1.3 trillion worth of commercial paper would qualify.

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