Bears continue their attack sending major market indices to three year lows.  The Dow ($INDU) fell 449.36 points, or 4.06 percent, to close the session at 10,609.66. The S&P 500 ($SPX) declined 57.21 points, or 4.71 percent, to 1,156.39. The Nasdaq ($COMPQ) gave up 109.05 points, or 4.94 percent, to 2,098.85 Volume remained heavy on the session with 2.15 billion shares traded on the NYSE and 3.14 billion shares exchanged on the Naz. Market breadth was negative by a 1-to-15 and 1-to-5 margin on the Big Board and Naz respectively.

AIG (AIG) remained a focus Wednesday after the government announced it had thrown a life line to the insurance giant. The Fed will lend AIG up to $85 billion for two years, but AIG is giving up nearly 80 percent of shares as a result. AIG also needs to pay back the loan in 24 months, which means a number of successful divisions are likely to be sold. AIG shares continued to decline on the news, losing 45.3 percent today to a price of $2.05. AIG is a Dow component, though it might not be for long.  

In other financial news, Barclay’s (BCS) agreed to buy Lehman Brothers (LEH) North American investment banking and capital markets businesses for $1.75 billion. Washington Mutual (WM) shares fell 13.36 percent Wednesday, but are seeing gains after the bell on reports the company has hired Goldman Sachs and Morgan Stanley to find a buyer. Earnings announcements from both Goldman (GS) and Morgan Stanley (MS) showing the firms are well capitalized has done little to halt declines with these two stocks down 13.9 percent and 24.2 percent respectively. In fact, MS is considering being purchased by Wachovia (WB), which has pushed the stock higher in afterhours trading.

In economic news, housing starts fell to a 17.5 year low in August, showing that problems in the sector are far from over. Building permits fell nearly 9 percent during the month as well; a sign that starts will be week in the months to come. However, oil prices moved higher on news crude inventory levels fell by 6.3 million barrels for the week ending September 12. Crude closed with a gain of $6.01 a barrel to $97.16 with a falling dollar also benefiting the commodity.

Not just financial stocks are taking a hit during this downturn with Apple (AAPL) off 8.61 percent Wednesday and Microsoft (MSFT) down 5.46 percent. Shares of airline stocks did suffer on the session on the rise in oil prices, although Tuesday’s gains helped offset these losses. The AMEX Airline Index ($XAL) was down 10.17 percent today to 25.27.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site