WCBSTV reports: The stock market suffered one of its worst days in years Monday as investors reacted to a stunning reshaping of the landscape of Wall Street that took out two storied names: Lehman Brothers Holdings Inc. and Merrill Lynch & Co. The major indexes each fell more than 3 percent, and the Dow Jones industrials fell almost 500 points at the closing bell on Monday.

This is the Dow Jones industrials sixth-largest point drop ever and their worst showing since they lost 508 in the October 1987 crash.

Investors were shaken by Lehman’s bankruptcy filing and what was essentially a forced sale of Merrill Lynch to Bank of America for $50 billion in stock.

While those companies’ situations had reached some resolution, the market remained anxious about other companies. Among them: American International Group (AIG) Inc., which is seeking emergency funding to shore up its balance sheet.

The swift developments are the biggest yet in the 14-month-old credit crises that stems from now toxic subprime mortgage debt.

Investors are worried that trouble at AIG and the bankruptcy filing by Lehman, felled by $60 billion in bad debt and a dearth of investor confidence, will touch off another series of troubles for banks and financial institutions that may be forced to further write down the value of their own debt assets. Wall Street had been hopeful six months ago that the collapse of Bear Stearns would mark the darkest day of the credit crisis.

AIG’s troubles a week after its stock dropped 45 percent are worrisome for some investors because of the company’s enormous balance sheet and the risks that troubles with that companies finances could spill over to the companies with which it does business. AIG, one of the 30 stocks that make up the Dow industrials, fell $6.93, or 57 percent, to $5.21 Monday as investors worried that it would be the subject of downgrades from credit ratings agencies.

(CBS2 HD)