NEW YORK (CNNMoney.com) - Wall Street slumped Thursday afternoon. The S&P 500 closed at an all time low since 1997 as fears of a prolonged recession sparked a massive selloff. The Standard & Poor's 500 index lost 6.7 percent according to early tallies and closed at its lowest point sine April 14, 1997. The Dow Jones industrial average (INDU) lost 445 points or 5.6 percent. It closed at the lowest level since March 12, 2003, just above the low of the last bear market. The Nasdaq composite lost 5.1 percent and also closed at its lowest level since March 12, 2003.
Stocks were mostly lower throughout the session after the morning's weak readings on the labor market and manufacturing sector. The major gauges briefly bounced after falling to some key technical levels, before turning lower. The fate of the automakers and the woes of Citigroup were among the factors dragging stocks down Thursday afternoon. GE slumped too on news that it is not getting additional capital, as had been rumored.
"The wealth destruction is phenomenal," said Tom Schrader, managing director at Stifel Nicolaus. After the close, Dell reported better-than-expected earnings and worse-than-expected revenue. Market breadth was negative. On the New York Stock Exchange, losers beat winners ten to one on volume of 2.23 billion shares. On the Nasdaq, decliners topped advancers by five to one on volume of 3.17 billion shares.
Automakers: The Senate called off a vote on a proposed $25 billion bailout package for the industry due to lack of support. Democratic leaders have said that the Senate will return in December to discuss a package if the automakers can show how the money would enable them to turn their business around. The top executives of Chrysler, GM and Ford Motor have been on Capitol Hill all week making the case for additional government support to stay afloat. Critics said the companies would be better served by declaring bankruptcy, restructuring and reemerging.
GM shares bounced Thursday afternoon after hitting the lowest level since the Great Depression. Ford Motor shares also bounced after hitting lows. On Thursday, General Motors' finance arm GMAC said it has filed to become a bank holding company, in a bid to tap into the $700 billion bank bailout. Citigroup: The company's largest shareholder, Saudi Prince Alwaleed Bin Talal, said Thursday that he is increasing his stake in the troubled bank back to 5 percent from 4 percent, even as shares continue to plummet. Citigroup shares plunged 20 percent.
The move follows the U.S. government's decision to inject $25 billion into the bank. Earlier this week, Citi said it was cutting over 50,000 of its staff as a means of cutting costs heading into what is expected to be a rough 2009. Sources said Thursday that Citigroup officials are lobbying the SEC to reinstate the ban on the short selling of financial shares, the Wall Street Journal reported.
In other corporate news, General Electric denied it is looking for money from sovereign wealth funds or other funds. Economy: The number of Americans filing new claims for unemployment jumped last week to 542,000, the highest level in 16 years, the government reported. The number of people continuing to collect unemployment benefits neared a 26-year high. The index of leading economic indicators (LEI), fell by 0.8 percent in October, after gaining a revised 0.1 percent in September. Economists thought the Conference Board report would fall by 0.6 percent. The November Philadelphia Fed index, a regional read on manufacturing, fell to negative 39.3 from negative 37.5 in October. Economists expected a reading of negative 35.
The economy is widely considered to be in recession, despite the lack of an official declaration by the government or the research group that calls economic cycles. Speaking in the afternoon, Treasury Secretary Henry Paulson said that the current financial crisis is something only seen once or twice in a century. However, he also cautioned against imposing too-strict rules to prevent it from happening again.
Other markets: Markets worldwide declined. Asian stocks tumbled, with the Japanese Nikkei losing 6.9 percent. European stocks tumbled, with London's FTSE 100 down 3.3 percent and the German DAX down 3.1 percent. U.S. light crude oil for December delivery fell $3.32 to $50.30 a barrel on the New York Mercantile Exchange, after briefly falling below $50 a barrel in electronic trading. Oil is trading at the lowest levels since Jan. 2003. Gasoline prices dipped another 2.7 cents to a national average of $2.02 a gallon, according to a survey of credit-card activity released Thursday by motorist group AAA. Prices have been declining for more than two months. During that time, prices have dropped by $1.84 a gallon, or over 52 percent.
The dollar fell versus the euro and the yen. COMEX gold for December delivery rose $12.70 to $748.70 an ounce. Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to a five-year
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