YAHOO[BRIEFING.COM]: The government is taking a major stake in Citigroup, GE is slashing its dividend, and fourth quarter GDP readings show the economy contracted at its sharpest rate since 1982. Those headlines led to some very choppy trading and pushed the S&P 500 and the Dow to their lowest intraday and closing levels since 1997.

A rather bearish close to the prior session, in which the stock market declined roughly 1.6%, left market participants in a dour mood. The pessimistic tone was exacerbated when Citigroup (C 1.50, -0.96) announced it is offering common shares for up to $27.5 billion in existing preferred equity. The government will exchange a maximum of $25 billion face value of its preferred stock, which gives the government a 36% stake in the company.

Reports earlier in the week indicated the government was in talks with Citigroup, so the announcement wasn't a total surprise. However, news that Citi is suspending dividends on common shares and its preferred shares came as a real disappointment.

Though transaction is expected to increase Citigroup's tangible common equity, which will help it absorb future losses, Standard & Poor revised its outlook for Citi to Negative. Moody's lowered Citi's long-term ratings.

Economic bellwether General Electric (GE 8.51, -0.59) slashed its quarterly dividend to $0.10 per share from $0.31 per share. The dividend cut is expected to save the company some $9 billion annually, according to reports. The cut will also help protect GE's AAA credit rating.

Analysts were anticipating the dividend cut, given the troubles and challenges facing GE's capital unit. Because of the unit's exposure to capital markets the stock has traded similar to financial stocks even though the company is an industrial stock.

In turn, GE's weakness caused the industrial sector to fall 2.7% this session, but 18.0% this month. Financial stocks dropped 7.4% this session, and 18.4% in February. They weren't alone; all 10 sectors in the S&P 500 finished lower for the session and for the month.

Broad-based selling pushed all three major indices lower for the session. The S&P 500 closed near its worst levels of the session.

Earnings reports did little to bolster investor sentiment during the session. Gap (GPS 10.79, -0.56) and Kohl's (KSS 35.14, +0.44) both posted relatively disappointing quarterly results, and Dell (DELL 8.53, +0.32) reported lower diluted earnings per share.

Economic data remains gloomy. Fourth quarter GDP was revised lower to reflect an annual rate of -6.2% versus a previously estimated -3.8%. The decrease in fourth quarter activity primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment. To little surprise, government spending provided a positive contribution.

A consistent flow of negative headlines has left pessimism largely unchecked as traders continue to bet against stocks. The bet seems to have paid off for bearish bets since February marked the worst monthly performance for each of the major indices since October.

More than 2 billion shares traded hands on the NYSE this session. That's the most since December.DJ30 -119.15 NASDAQ -13.63 SP500 -17.74 NASDAQ Adv/Vol/Dec 1082/2.15 bln/1593 NYSE Adv/Vol/Dec 1010/2.15 bln/2057