Stocks at 12-year lows
Dow ends at lowest point since April of 1997, S&P 500 at lowest close since October of 1996.
NEW YORK (CNNMoney.com) -- The Dow Jones industrial average and S&P 500 ended at fresh 12-year lows Tuesday as Wall Street failed to mount a rally amid ongoing worries about the financial markets and the recession.
The Dow Jones industrial average (INDU) fell 37 points or 0.6%, closing at the lowest point since April 18, 1997, when it ended at 6703.55.
The S&P 500 (SPX) index lost 4.5 points or 0.6%, ending at the lowest point since Oct. 10, 1996, when it ended at 694.61.
The Nasdaq composite (COMP) gave up nearly 2 points, or 0.1%. The tech-fueled average has held up better than the other major averages this year and remains above its close of 1,316.12 from last Nov. 20.
Stocks tumbled Monday, with the Dow and S&P 500 falling to 12-year lows after American International Group (AIG, Fortune 500)'s huge quarterly loss exacerbated worries about the financial sector and the economy.
That selloff brought in some buyers Tuesday, but trading was choppy as investors considered the latest from Washington and weak reports on auto and home sales.
"I think people are at a loss for answers right now," said Larry Glazer, managing director at Mayflower Advisors. "Investors are mentally exhausted, and the market at multiyear lows has a psychological impact."
He said it's possible that the declines are part of a cycle the market needs to go through to get to healthier footing, but that, regardless of that, it's very painful for investors in the near term.
"This is a risky market and investors need to ask themselves if the stocks they own are ones they want to own through an extended downturn," said Robert Loest, portfolio manager at Integrity Funds. "If not, they should be raising cash."
He said that the recent declines are likely not the bottom, with equities bound to experience another leg down later in the year. "If you have a time horizon of 3 or 4 years or more, you're going to see good results, but this year will be grim."
Obama: The President said that at this point, "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it," while speaking to reporters after meeting with British Prime Minister Gordon Brown.
He said that he is "absolutely confident" that credit will start to flow again, businesses will start to invest and hire and that the economy will recover.
At an earlier speech at the Department of Transportation, the President acknowledged the brutal fourth quarter of last year, in which the economy shrank at its sharpest pace in almost 26 years. He said that the first quarter doesn't look like it will be any better and talked about the need for unlocking credit markets.
The Federal Reserve launched the much-awaited TALF, a lending program aimed at consumers and small businesses Tuesday.
The $200 billion Term Asset-backed Securities Loan Facility, or TALF program, will start making loans available on March 17. The government said a future expansion to $1 trillion could include some of the bad assets currently cluttering up bank balance sheets.
Bernanke and the budget: Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee that lawmakers need to move aggressively to get the economy out of its slump, even if it balloons the federal deficit. He said that stabilizing the financial sector was key to a recovery.
Bernanke also defended the government's latest bailout of troubled insurance firm AIG, which received an additional $30 billion Monday. Bernanke said the government needed to step in because AIG's global reach means there's a "contagion" risk should it fail.
President Obama's 2010 budget was also in focus Tuesday. Both Treasury Secretary Timothy Geithner and budget chief Peter Orszag spoke to House committees to defend the proposed $3.6 trillion budget.
Autos: U.S. auto sales plunged 40% in February, the industry's worst monthly performance in 27 years.
Ford Motor (F, Fortune 500) said sales plunged 48% in February, slightly better than the 50% drop forecast by sales tracker Edmunds.com.
General Motors (GM, Fortune 500) said sales tumbled 53% in the month, worse than the 47% drop analysts were expecting.
Toyota Motor (TM) said sales dropped 40% from a year ago, versus forecasts for a drop of 39%. Chrysler LLC said sales fell 44%, versus forecasts for a drop of 55%.
Economy: Pending home sales sank to a record low in January, according to a National Association of Realtors report released Tuesday morning. Sales fell 7.7% versus forecasts for a drop of 3.5%, according to a consensus of economists surveyed by Briefing.com. Sales rose a revised 4.8% in December.
Company news: Citigroup (C, Fortune 500)'s CitiMortgage will lower home loan payments for three months and waive fees for some borrowers who are unemployed. The troubled financial company has received billions in federal aid and on Friday made a deal for the government to control as much as 36% of Citi's common stock. Shares gained 6.9%.
Blockbuster (BBI, Fortune 500) has hired lawyers to help it raise money and refinance debt, the video chain said, but it denied reports it was considering a bankruptcy filing. Shares plunged nearly 77% through the afternoon before being halted ahead of the news.
Rival Netflix (NFLX) gained 6%.
MetLife (MET, Fortune 500) and other insurers continued to slide, sending the KBW Insurance (KIX) index down 5.3%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners two to one on volume of 1.9 billion shares. On the Nasdaq, decliners topped advancers nine to five on volume of 2.44 billion shares.
Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.9% from Friday's 3.01%. Treasury prices and yields move in opposite directions.
Other markets: In global trading, most Asian and European markets ended lower.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for April delivery rose $1.50 to settle at $41.65 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery fell $26.40 to settle at $913.60 an ounce.
Talkback: Are you living on your unemployment check? How are you making ends meet? What bills are you paying - and which ones are sliding? E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. 
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