Citigroup plunged 39 percent after the Treasury agreed to convert as much as $25 billion of preferred shares into common stock in a third rescue attempt. Bank of America Corp. tumbled 26 percent, snapping a four-day rally in an S&P 500 group of banks. Alcoa Inc. and Boeing Co. fell more than 3.8 percent after the Commerce Department said gross domestic product contracted at a 6.2 percent annual pace in the fourth quarter.
The S&P 500 lost 2.4 percent to 735.09, its lowest close since December 1996. The Dow Jones Industrial Average fell 119.15 points, or 1.7 percent, to 7,062.93, leaving it 50 percent below its 2007 record and at its lowest level since May 1997. The Russell 2000 Index slipped 1 percent.
European stocks fell, capping the Dow Jones Stoxx 600 Index’s sixth straight monthly drop, after the U.S. government cut shareholders’ stake in Citigroup Inc. by 74 percent and a report showed the world’s biggest economy shrank at a faster pace than previously estimated.
Lloyds Banking Group Plc tumbled 22 percent in London after saying it hadn’t reached agreement on a government asset insurance program. Royal Bank of Scotland Group Plc fell 20 percent, while Citigroup slumped 36 percent in New York. Rio Tinto Group and Norsk Hydro ASA retreated more than 3 percent after Goldman Sachs Group Inc. advised investors to sell the shares after cutting forecasts for prices of industrial metals.
Europe’s Stoxx 600 sank 1.8 percent to 172.92, extending its weekly drop to 2.3 percent. The regional gauge lost 9.6 percent this month as companies from Anglo American Plc to Cie. de Saint Gobain SA posted disappointing results and the economic crisis in eastern Europe deepened.
Asian stocks rose, paring the regional benchmark index’s worst start to a year since 1990, as brokerages upgraded technology companies and on optimism Citigroup Inc. will avoid being nationalized.
The MSCI index rose 1.3 percent to 75.28 as of 7:20 p.m. in Tokyo, narrowing its February drop to 9.3 percent and its 2009 decline to 16 percent. Stocks have fallen as the global recession battered earnings at companies from Toyota Motor Corp., Japan’s largest automaker, to BHP Billiton Ltd., the world’s biggest mining company.
The Nikkei 225 Stock Average climbed 1.5 percent to 7,568.42, paring its drop this month to 5.3 percent. Game maker Nintendo Co. paced gains by exporters as the yen weakened. South Korea’s Kospi Index rose 0.8 percent, while the Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, declined 1.8 percent, paring its 2009 gain to 14 percent.