NEW YORK - WALL Street stocks dropped to fresh 12-year lows on Monday on heightened fears about the financial sector after a new bailout announced for insurance giant AIG and big troubles for Britain's HSBC.
The Dow Jones Industrial Average skidded 300.11 points (4.25 per cent) to 6,762.82 at the closing bell, its first close below 7,000 points since 1997.
The broad-market Standard & Poor's 500 index sank 34.28 points (4.66 per cent) to a preliminary close of 700.81, its lowest since late 1996.
The Nasdaq fell 54.99 points (3.99 per cent) to 1,322.85, capping a calamitous session for global markets.
The market extended losses after a dismal week in which the Dow fell to its lowest level since 1997 and the S&P dropped to its weakest since 1996.
Market action came after the US government unveiled a fresh aid plan of US$30 billion (S$46.6 billion) for AIG to stave off collapse of the ailing insurance company as it revealed massive new losses.
'The risk now is that a global adverse feedback loop is forming: As financial market problems persist, further declines in employment and corporate profits lead to loan defaults, which damage banks' bottom lines,' said Joseph Brusuelas at Economy.com.
'The decline in equity prices for banks makes it more difficult to attract private capital and causes financial institutions to become more risk-averse and reluctant to lend.' World markets were under pressure after British banking giant HSBC said it was seeking a huge capital injection to survive the global economic crisis.
HSBC revealed on Monday that it needs nearly US$18 billion of new capital to withstand the financial crisis and announced 6,100 job cuts after a profits collapse.
The bank reported a 70 per cent plunge in annual net profit last year and said it hoped to raise 12.5 billion pounds (S$28.4 billion) in a record British rights issue. -- AFP