3 Mar 2009

Dow goes below 7,000

7:43 am on 3 March 2009

The Dow Jones industrial average fell below 7,000 on Monday for the first time in more than 11 years due to growing pessimism about the health of banks.

A quarterly loss of $US61.7 billion at insurer American International Group Inc has touched off fresh fears about the health of the nation's financial system.

In midday trading, the Dow fell 226.52, or 3.2%, to 6,836.41. The Dow last closed below the 7,000 level on 1 May, 1997.

Standard & Poor's 500 index fell 26.19, or 3.6%, to 708.90 and the Nasdaq composite index fell 38.84, or 2.8%, to 1,339.00.

Since October 2007, the credit crisis and recession have lowered the average value of the index by half.

The government said it would give AIG a further $US30 billion in loans, in addition to the $US150 billion it has already injected into the company.

Investors are also worried about European financial companies.

HSBC PLC, Europe's largest bank by market value, reported a drop of 70% in 2008 earnings on Monday and said it needs to raise $US17.7 billion and cut 6100 jobs.