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Wall Street tumbles as financials slide

NEW YORK — The credit crisis and recession have slashed more than half the value off the Dow Jones industrial average since it hit a record high over 14,000 in October 2007. And now many investors fear the market could take a long time to regain the lost 7,000.

“As bad as things are, they can still get worse, and get a lot worse,” said Bill Strazzullo, chief market strategist for Bell Curve Trading. Strazzullo said he believes there’s a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.

The “game-changer,” he said, will be the housing market and whether it can stabilize.

A recovery will also require signs of health among financial companies, but so far in 2009, it is clear that banks and insurance companies’ losses are multiplying despite hundreds of billions of dollars in government help.

While the root of financial firms’ problems lie with the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems as it also forces millions of job cuts.

“The economy definitely has deteriorated since November,” said Sean Simko of SEI Investments. “It’s just the fact that we haven’t seen signs of improving or stabilizing, per se, which is adding to the morass of the market.”

About 16 stocks fell for every one that rose on the New York Stock Exchange, where volume came to a heavy 1.80 billion shares.

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