Investors turned cautious again today as a staggering $61.7 billion in quarterly losses at insurer American International Group Inc., which has operations in Hartford, touched off fresh worries about the health of the nation’s financial system.
The Dow Jones industrial average fell below 7,000 for the first time in more than 11 years as investors grew pessimistic about the health of banks, and in turn the economy. The blue chips hadn’t traded below the psychological barrier since Oct. 28, 1997, and last closed below that mark on May 1 of that year.
The credit crisis and recession have now slashed half the average’s value since it hit a record high over 14,000 in October 2007.
Investors are fleeing financials after the government said it would give AIG another $30 billion in loans, besides the $150 billion it has already given the company. To raise money, AIG has agreed to sell, among other businesses, Hartford-based HSB Group, parent of Hartford Steam Boiler Inspection and Insurance Co. to Munich Re for $742 million.
At 11 a.m., AIG traded at 49 cents, up 7 cents, or 16.6 percent.
Investors are worried about European financial companies, too. HSBC PLC, Europe’s largest bank by market value, reported a 70 percent drop in 2008 profit and said it needs to raise $17.7 billion and cut 6,100 jobs.
“As bad as things are, they can still get worse, and get a lot worse,” said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there’s a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.
The “game-changer,” he said, will be the housing market and whether it can stabilize. (AP)
