In the final minutes of trading, major indexes broke through their July lows, with the Dow Jones Industrial Average plunging a whopping 504.48, or 4.4 percent, to close at 10917.51. The S&P 500 falling 4.7 percent to close at 1192.96. The Nasdaq shed 3.6 percent.Keep in mind AIG is the biggest insurance company in the world. If they go under, it might take the entire system with it.
The market is worried about a possible failure of AIG — as early as tomorrow morning — said Matt Cheslock, a senior specialist at Cohen Specialists, and traders just don't want to stick their necks out amid that kind of uncertainty.
"When the Fed came out and said they [AIG] have got to go to alternative sources, that means no one would want to bail out AIG without any backup," Cheslock said. "If AIG fails tomorrow morning, it's the same thing written all over this market," he said. "I don't think anyone is going to want to take any positions overnight."
It's only a question of when AIG fails and how much damage it causes.
[UPDATE] Washington Mutual is under $2 a share and falling in after hours trading as its credit rating is officially lowered to junk bond status by S&P. It might not survive tomorrow either.
[UPDATE 2] Hewlitt-Packard announced late today that it is cutting nearly 25,000 jobs and taking a $1.7 billion charge. The toxin is spreading.