US Treasury Secretary Henry M. Paulson, Jr. delivered remarks on the financial system Thursday, Nov 20, 2008, at the Annual Reagan Lecture at the Ronald Reagan Presidential Library. "Until the financial crisis is behind us, we must remain vigilant, ready to respond and to manage unpredictable events as they occur. Our first priority is on recovery. And then we will need to repair our financial system and the... more

Global Financial Crisis: On Thursday, barometers of stress hit highs that had not been seen for decades, on fears of a deep recession. In New York, the S&P 500  fell to a 1997 low and banking giant Cit fell 26% after a 23% plunge on Wednesday.

The Dow Jones Industrial Average plunged 444.99 points, or 5.6%, to 7552.29. The S&P 500's financial sector fell 10.7%, while the overall index dropped 6.7% to 752.44 - - its lowest close since 1997. The Nasdaq fell 5%.

The Chicago Board Options Exchange Volatility Index  -- the Vix - - a popular measure of investor anxiety, jumped 8.9% to 80.86 on Thursday.

Yields on two-, five- and 10-year and 30-year bonds fell to the least since the US Treasury began regular issuance of the securities as investors with cash moved to safety.

Rates on three-month bills fell to 0.02%, which equals the level reached after the collapse of Lehman Brothers in mid-Sept - - the lowest since the start of World War II.

Bloomberg says the benchmark 10-year yield dropped 31 basis points to 3.02% at 4:48 p.m. in New York, according to BGCantor Market Data. The 3.75% security due November 2018 rose 2 22/32, or $26.88 per $1,000 face amount, to 106 1/32. The yield is the lowest since at least 1962. The yield on the 2-year note fell 9 basis points to 0.97 percent. The 30-year yield tumbled 46 basis points to 3.46%, the biggest drop on record. The yield is the lowest since regular sales started in 1977. Yields on five-year notes declined to 1.88%, not seen since 1954, according to data compiled by Bloomberg and the Fed.

The number of Americans filing new claims for unemployment jumped last week to 542,000, the highest level in 16 years, the government reported. The number of people continuing to collect unemployment benefits neared a 26-year high.

The index of leading economic indicators (LEI), fell by 0.8% in October, after rising 0.1% in September.

Credit markets remained tight and the so-called Ted spread, the gap between yields on safe three-month Treasuries and the rate that banks charge one another for loans of the same duration, was unchanged at 2.11%. The spread is down from its peak of 4.6 points on Oct. 10, but the recent improvement in the credit markets has halted over the last two weeks. Analysts view a level of 0.5 point to 1.0 point to be normal. The high-grade corporate bond index Markit CDX IG11 was 38.25 basis points wider than Wednesday's close at 282.5/283.5 basis points, according to Markit.

Citigroup's stock fell to $5—a 13-year low.

Most institutional investors and pension funds are barred from owning stocks below $5. So if Citigroup's stock remains below that level, it could trigger a wave of selling that would send the share price even lower.

"That's the danger of crossing that $5 threshold," says Owen Malcolm, senior vice president of Sanders Financial Management in Atlanta. "They're (Citigroup) already in trouble. It could get worse."

Saudi Arabian billionaire Prince Alwaleed bin Talal bin Abdulaziz Al Saud said Thursday he will increase his holdings in Citi back to 5%, adding that he supports the bank's management.

"It's getting to the point where it's make-or-break time for Citigroup," says Ryan Detrick, an analyst at Schaeffer's Investment Research in Cincinnati. "It doesn't look promising."

"The profit drag on corporate America is widening and deepening, and this is leading to more layoffs and cutbacks in capital spending, which is extending and deepening the recession," said Stuart Schweitzer, global markets strategist for J.P. Morgan Private Bank. "We've gotten into a full-blown, self-feeding downturn."

"We think it's going to continue to go lower," said Ryan Detrick on the market."We don't think people are scared enough. They're just not showing enough fear. People are numb to this, they're almost immune to it."

Oil briefly moved below the $49.90 level, which marks the low of January 2007.