Stocks Lose Early Gains; AIG Weighs Down Market

US indices rose more than 2% in the early going, but after peaking within the first hour of trading, stocks slid downhill the remainder of the session, closing near the lows of the day.

Dow 8,870.54 -73.27; NASDAQ 1,616.74 -30.66; S&P 500 919.21 -11.78; NYSE Composite 5,802.05 -69.93

Major concern was raised when it was revealed that the US Treasury, the font from which flows all manner of goodness and capital - out of thin air - agreed to fund failed insurer AIG with another $40 billion, making the total spent on bailing out just that one company more than $150 billion. The money is coming from the omnibus package approved by congress in October which is authorized to spend up to $700 billion to aid ailing financial (and other) firms.

Also topping the news this Monday was word that Circuit City, which just last week announced the closure of more 200 stores, was filing for bankruptcy protection under chapter 11, meaning that it will reorganize while stiffing most of its creditors. Probably better that than putting the US taxpayer on the hook for a slew of unsold DVDs, digital cameras and flat-screen TVs. Maybe the Treasury can give the goods to needy families as Christmas gifts.

China announced their own version of socialized capitalism with a $586 billion bailout plan of their own. If Chinese companies can't make of go of it, who can?

All of that helped destroy what little confidence investors had left, which, not surprisingly, is very little.

Advancing issues trailed decliners by a solid margin, 4357-2002, and new lows remained better than new highs by an expanding margin, 411-12. Volume was on the low side.

NYSE Volume 1,141,823,000
NASDAQ Volume 1,717,664,000

All this should surprise nobody. As mentioned here at the end of last week, the market was poised for a nose-dive after a sharp preelection run-up and now it is merely in the rigorous process of retesting recent lows. The problem for most investors is that those lows were not friendly, nor were they indicative of any kind of bottom. With companies from diverse industries lining up for government money, the extent of this downturn could reach any kind of proportion. Or it could end tomorrow. That is the level of uncertainty faced today.

Commodities seem to have bucked their own downtrend, at least for the time being. Oil priced higher by $1.37, to $62.41. Gold gained $12.30, to $746.50, while silver added 26 cents to close at $10.22.

GM got downgraded and shipper DHL announced more than 9000 job cuts. There was even more bad news, but why belabor the point?