After a midday lull, stocks plummeted again late today as traders adjusted to the failure of Lehman Brothers and the acquisition of Merrill Lynch by Bank of America, Bloomberg reports. Lehman’s stock alone was down 94.9%. The Dow fell 504.48 to 10,917.51. The S&P 500 lost 59.01, its biggest drop since the 2001 terror attacks, closing at 1,192.69; the Nasdaq fell 81.36 to 2,179.91.
“Fear is in charge,” one exec said. “This blows another hole in the banking system's ability to extend credit.” Surviving big investment banks Goldman Sachs and Morgan Stanley each fell around 12% in anticipation of their quarterly reports, due this week—both are expected to report $1-2 billion writedowns but stay in the black. AIG plummeted 57.9% as New York Gov. David Paterson announced the insurer would be able to tap its own subsidiaries for a needed $20 billion loan.