A record high for crude oil and continued concerns about the health of financial stocks crushed a morning rally, extending the losses the stock market has seen since mid-July to about 6%.

Crude oil had its first close above $78 a barrel in New York today, and there was talk crude might hit $80 a barrel amid worries that domestic demand would outstrip supplies. Crude closed at $78.21, up $1.38. It was up 10.7% for July and is up 28% for the year.

At the same time, the market was startled when American Home Mortgage Investment (AHM, news, msgs), a big mortgage lender, said it was unable to borrow on its credit facilities and is struggling to raise money. The stock promptly lost 90% of its value to $1.10. The stock did not trade on Monday because of pending news. When it opened today, its value essentially vanished. The stock peaked in August 2005 at $39.84.

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