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Dow close is the lowest in 12 years

Wednesday's rally was more than wiped out, the slide exacerbated by short sellers' bets.

The Associated Press
March 6, 2009 at 5:35AM

NEW YORK - Investors retreated from Wall Street again, driven by worries about the nation's big banks and General Motors Corp.

Stocks slid to their lowest levels in more than 12 years Thursday, more than wiping out the previous session's rally. Investors wrestled with relentless uncertainty about the financial system and fresh concerns about GM. Short selling -- bets that stocks will fall -- ahead of the government's Friday employment report exacerbated the losses, slashing 281 points from the Dow Jones industrials and sending all the major indexes down more than 4 percent.

Stocks fell in every industry, with beleaguered banks posting some of the steepest drops. Citigroup Inc., still shaky despite receiving billions in government aid, at times sank below $1 and finished down 9.7 percent at $1.02. GM, meanwhile, ended with a loss of 15 percent at $1.86 as it warned of possible bankruptcy.

"Citigroup going below a buck today was a little scary," said Mark LeStrange, director of sales at Source Trading.

"To say that we're cheap here and it's a good value, it sounds right, but in all reality we could go 50 percent lower," he said. "Nobody has any idea how low we can go."

The Standard & Poor's 500 index is now down 56.4 percent from its peak in October 2007, making it the second worst slide for the index since its plunge of 86.2 percent from 1929 to 1932.

The latest torrent of selling came ahead of the February Labor Department report that is likely to show hundreds of thousands of jobs were lost. Reports showing better-than-expected retail sales and factory orders Thursday weren't enough to stoke investor confidence.

Short sellers also dragged on the market, analysts said. Short sellers place bets that a stock will fall, and rising short positions on a stock can intensify its decline.

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"Just go out, kill them. It's the easiest way to go out and make a buck," said Stephen A. Lieber, chief investment officer at Alpine Woods Capital Investors in Purchase, N.Y., referring to short sellers.

The Dow fell 281.40, or 4.1 percent, to 6,594.44, its lowest close since April 1997.

Broader indicators also tumbled. The S&P 500 index dropped 30.32, or 4.3 percent, to 682.55, its lowest close since September 1996. The Nasdaq composite index fell 54.15, or 4 percent, to 1,299.59.

On the New York Stock Exchange, only 235 stocks advanced while 2,887 fell. Consolidated volume came to a heavy 7.28 billion shares compared with 7.51 billion shares traded Wednesday.

about the writers

about the writers

SARA LEPRO

TIM PARADIS

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