As Auto Bailout Hopes Fade, So Do Stocks

Dow Plunges More Than 400 Points As Prospects Dim For Immediate Lifeline For Automakers

(CBS/AP)  Stocks plunged for a second straight day Thursday, falling to a range not seen in more than five years as financial and energy stocks tumbled while demand for the safety of government debt spiked to historic levels.

Stocks saw the most intense selling late in the session after hopes faded that lawmakers would quickly put together an aid package for U.S. automakers and as the Standard & Poor's 500 index broke through lows established in 2002. That breach of a key technical threshold sent a shudder through the market and touched off further selling.

The Standard & Poor's 500 index fell 6.7 percent to the 752 level, below the closing low of 776.76 logged on Oct. 9, 2002. The Dow Jones industrial average, meanwhile, fell 445 points, or 5.6 percent, to its lowest close since March 2003. The decline brings the Dow's two-day drop to 873 points, or 10.6 percent, its worst two-day percentage loss since October 1987.

Investors seemed unmoved by remarks from Treasury Secretary Henry Paulson who said in a speech Thursday that the financial crisis hitting the global economy was something likely to occur only "once or twice" in a 100 years. He cautioned against overreacting by implementing regulations that are too onerous.

Financial stocks plunged on worries that the government's financial rescue won't be sufficient to cover banks' losses. Meanwhile, a sharp drop in oil prices weighed heavily on energy companies.

Citigroup, which crumbled 26 percent Thursday, was one of the biggest losers, reports CBS News correspondent Anthony Mason. Even after a Saudi prince upped his stake in the financial giant, the stock fell below $5. The total value of Citigroup's outstanding shares is now almost equal to the $25 billion in bailout money the treasury just pumped into the bank.

"I think Citigroup, at these prices they are at now, is shocking to most people," Doreen Mogavero, CEO of Mogavero, Lee & Co., told Mason.

Thursday's pullback came amid heavy volume, a welcome sign for some investors who are looking for the market to experience a cathartic sell-off that could lay the groundwork for a recovery. Heavier volume can signal investors are scared enough to sell rather than simply sitting on the sidelines, which can result in relatively light volume.

Observers said, however, that the selling was just as much to do with entrenched pessimism about the prospects for many corners of the economy.

"Unrelenting gloom has taken over the markets," said Dana Johnson, chief economist at Comerica Inc. "The economic news, the concerns about some major financial institutions, the concerns about the auto sector, earnings reports, everything is coming out in a way that is just provoking a massive selling in the stock market."

"Back in October we were looking at a potential catastrophic meltdown of the credit markets, and that didn't happen," he said. "But that doesn't mean tremendous damage hasn't been done to the economy."

According to preliminary calculations, the Dow fell 444.99, or 5.56 percent, to 7,552.29. It was the Dow's biggest percentage drop since Oct. 22 and its lowest close since March 12, 2003.

Broader stock indicators also showed huge declines. The Standard & Poor's 500 index fell 54.14, or 6.71 percent, to 752.44. The Nasdaq composite index fell 70.30, or 5.07 percent, to 1,316.12.

The Russell 2000 index of smaller companies fell 27.07, or 6.56 percent, to 385.31.

Declining issues outnumbered advancers by about 10 to 1 on the New York Stock Exchange, where volume came to 2.23 billion shares.

Gus Scacco, managing director at AG Asset Management, said investors can't manage to regain confidence as the market continues to plumb new depths. Stocks fell to their lowest level in more than five years on Wednesday.

"We're trying to make a bottom but we keep breaking through," he said.

Jon Biele, head of capital markets at Cowen & Co., said investors are bracing for more bad news.

"The view on the floor is nobody is sure what the next stop is," he said. "I think the market is expecting another shoe to drop."

"Some people think this is the capitulation we've been waiting for," he said. "All along we've been hoping for a real violent sell-off and the end of the day today was a pretty dramatic move."

Bond prices showed stunning advances as investors clamored for the safety of government debt. The yield on the benchmark 10-year Treasury note fell to 3.14 percent from 3.32 percent late Wednesday. Bond yields move opposite their price. The yield on the three-month Treasury bill, considered one of the safest assets around, fell to 0.03 percent from 0.06 percent late Wednesday.

Light, sweet crude for December delivery fell 7 percent, or $4, to settle at $49.62 on the New York Mercantile Exchange.

Overseas, stock markets tumbled, with benchmarks in Tokyo and Seoul losing almost 7 percent each, after recession fears sent Wall Street plunging and Japan suffered its biggest drop in exports in seven years.

Japan's Nikkei stock average fell 6.9 percent, while Hong Kong's Hang Seng Index slid 4.04 percent. Britain's FTSE 100 fell 3.26 percent, Germany's DAX index fell 3.08 percent, and France's CAC-40 fell 3.48 percent.

[inketolstoy]

energy and water technologies

You spoke the truth perk. The future of technology isn''t in fancy new gadgets manufactured by outdated factories, it is in the production of things we need. Genetic modification of plants is feeding us, but we still need energy and water. These new technologies won''t require millions of workers, just a few skilled ones. If you want to see the future, look in this direction.

[txgrouch2007]

During that week of Oct. 15--stocks fell below 8000--but several media outlets claim this time is the first time. How many "first times" do we have. Just like after 9/11 when stocks were at 12000- the media said the stock market was at its highest in US history-as if those days of it being over 18K (in the 1990s) never happened.
Posted by harbinger09 at 05:17 AM : Nov 21, 2008

It''s semantics. They''re talking about the CLOSING price, not the lowest instantaneous price.

Yes, the Dow dipped breifly below 8,000 in recent weeks. But it recovered later in the day and it closed above 8,000. Until this week.

Sorta like the weather report says the "low" temperature is the temperature 2 minutes before sunrise. Even if the temperature dropped lower at some other time in the day, they will report the "low" as the pre-sunrise value.

It''s just semantics. You can turn off the Twilight Zone for now. Cold is STILL cold. And the stock market is STILL a train wreck, no matter how you measure it.

[txgrouch2007]

So you''''re advocating that Americans make 5 cents an hour, or zero cents if imprisoned, so we can compete with evil countries?
Posted by Humanavance at 11:20 PM : Nov 20, 2008

Don''t shoot the messenger, Searing Truth. I''m just pointing out the reality that the masses REFUSE to take the medicine they need to fix our lack of global competitiveness.

I totally agree with you that we need some protectionist tariffs, at least on a temporary basis. But that will raise prices at Wal-mart, and the masses won''t stand for it.

The masses spoke on Election Day. They LIKE being herded down the path to destruction. We were outvoted.

The ONLY way out is to discover some revolutionary new technology, like the transistor and the microchip, that creates MILLIONS of new jobs to re-employ the skilled high-tech professionals who are currently scratching out a meager existence in a crummy sales job somewhere.

And we need to do it SOON. I''m running out of savings.

[txgrouch2007]

To answer your question above, however, one new set of technologies make genetically modified plants, and this has, for better or worse, been revolutionary.
Posted by perk235 at 05:37 AM : Nov 21, 2008

Cool! Where do I go to sign up for the HUUUGE number of new jobs that have been created by that "revolutionary" technology???

There must be recruiters standing in line competing for every applicant.

Where are the lines of recruiters?

[perk235]

You didn''''t answer my question = WHAT revolutionary new technology has been introduced since 1990? None.
Posted by txgrouch2007 at 10:47 PM : Nov 20, 2008
--------------
Although you didn''t pose this question to me, I think that it speaks to how critical it is for our country to be at the forefront of energy and water technologies as we move forward.

Those are two of the most important issues where we need to excel. Energy and water technologies are and will be in demand world-wide and are at the heart of our national defense.

To answer your question above, however, one new set of technologies make genetically modified plants, and this has, for better or worse, been revolutionary.

[beach671]

Fed''s should create legislation to immediately unlock all 401k''s and Federal TSP to allow everyone to withdraw funds now, taxed 30%.

Veterans Affairs should offer every disabled vet a "buy out". If you are 10% disabled, $10,000 cash tax free upon signing a form relinquishing Federal Govt. from disability payments. 20% disabled? $20,000. 30% disabled? $30,000...and on and on. Those that are really screwed up would likely not take it...and entire program would be optional for all.

Lowers Federal expense...spurs economy.

There are plenty of actions left for Obama to playout.

Eliminate Federal Regulations to spur economy....there''s lots of Federal regulations that choke our economy.

[perk235]

Thanks to the lawsuits and the regulations and the short term investors, the pace of innovation has slowed down. The rest of the world caught up with us. Once we start competing head to head with the lesser developed nations, we are toast.
Posted by machineguy at 12:32 AM : Nov 21, 2008
-----------------
There is one great innovation that cause this world-wide financial meltdown. DERIVATIVES, the risky bets made by the cowboys in the financial industries were DEREGULATED in the Commodities Modernization Act.

It is amazing that Paulson, during a metldown due to repeal of protections made in 1934 in the Glass/Steagall Act and due to deregulation of derivatives is worried about regulations.

He should be worried about the Great Depression II.

[harbinger09]

Stocks plunged for a second straight day Thursday, falling to a range not seen in more than five years as financial and energy stocks tumbled while demand for the safety of government debt spiked to historic levels.

During that week of Oct. 15--stocks fell below 8000--but several media outlets claim this time is the first time. How many "first times" do we have. Just like after 9/11 when stocks were at 12000- the media said the stock market was at its highest in US history-as if those days of it being over 18K (in the 1990s) never happened.

We are officially in the Twilight Zone now.

[louthesz9]

Where is Obama?

Where?


--------------------------------------------------------------------------------

Posted by devilspeaks at 08:00 PM : Nov 20, 2008

------------------------------------------------------

Relax, buster, relax. The guy just got elected and hasn''t started out his term yet. That idiot Dubya still has 2 more mos. to prove to us that he can overturn this avalanche of corporate meltdowns. LMAO

[momofdaisy]

IF the Big 3 get the money, there should be a cap on what the executives get paid and the perks. The Big 3 have bilked the American people enough. I don''t want my tax dollars to go to bail them out. I have cars to pay for!

[McHineguy]

Thanks to the lawsuits and the regulations and the short term investors, the pace of innovation has slowed down. The rest of the world caught up with us. Once we start competing head to head with the lesser developed nations, we are toast.

The answer - take the shackles off the innovators and let them innovate. Let us find a radically new technology that the rest of the world can''''t copy.

There are still open frontiers of research in the world of science that could have practical applications. We have still only scratched the surface of quantum mechanics, for example.

But nobody is doing large-scale research in this area that might lead to new technologies. Until somebody does, we''''re stuck in this rut.



--------------------------------------------------------------------------------

Posted by txgrouch2007 at 09:52 PM : Nov 20, 2008

If you are still here, we are in total agreement. There is a small symantic problem in what I call "tools" (no, im not a salesman). But I fully and totally agree that innovation, embodied in a physical apparatus (airplane, car, computer) is what gives man power to advance his lot. We need to get back to those prinicples.

[humanavance]

"The population will get used to it.
Posted by Humanavance at 11:03 PM : Nov 20, 2008

LOL! Time for bed. You''re already DREAMING!!!"
txgrouch2007


So you''re advocating that Americans make 5 cents an hour, or zero cents if imprisoned, so we can compete with evil countries?

Wow.

Now that''s an evil treasonous Americans can only dream of.

And loyal Americans will fight to the death.
ST


"Justice begins where we stand."
SearingTruth

A Future of the Brave

[devilspeaks]

The bible is against me and I hate it?
When it talks about Gods chosen people I get mad as hell.
The Lord Jesus even quoted it to me when I tempted him in the wilderness and I had to flee?
The bible is the only place where it talks about Gods chosen people. I rather have any good than Gods absolute right and wrong?
Because self then rules by its own understanding with God not being in the picture?
My hope is that no one else will turn to Jesus as their sin bearer so that they can have eternal life here and there.


I influence peoples motives without them realizing it is me, the devil, thats doing it.

[devilspeaks]

Good with SELF you will spend a glorious eternity alone without the love of God if you so chose at the time of your exit out of your life and into the life of darkness? Excellent! No hope of love no hope of assurance no hope of joy etc etc just alone with no God ever to tell you what to do?

[txgrouch2007]

The population will get used to it.
Posted by Humanavance at 11:03 PM : Nov 20, 2008

LOL! Time for bed. You''re already DREAMING!!!

[txgrouch2007]

Any bailout should be spent on fixing the housing crisis
Posted by staplesla at 10:51 PM : Nov 20, 2008

Too late. Paulson has diverted the bailout money to invest it in the stock market instead. No home loans will be purchased after all.

The authority for Paulson to do this is one of the things that were added in such haste while Congress was pressured to vote for it before they had a chance to even read what they were voting on.

Now Paulson is authorized to start nationalizing our businesses. The government will become partial owner of businesses that it regulates.

This sets the precencent to nationalize the auto makers under the guise of "rescuing" them. Sounds Marxist doesn''t it?

And all over a $25 billion loan, when $25 billion has ALREADY BEEN ALLOCATED to the car makers, contingent on their meeting C.A.F.E. efficiency standards.

That is, THEY ARE JUST TRYING TO BAIL OUT OF MEETING THE EFFICIENCY STANDARDS.

This is such a crock, it''s criminal. But this is what we''ve come to expect from this Congress.

We told them to vote "no" on the bailout. Did they listen? Why would they start listening now? The elections are over. WHY WOULD THEY CARE what we think now???

[humanavance]

"...Yes, we COULD stop imports from the slave labor nations. That would be called PROTECTIONISM, which is roundly opposed by the vast majority of the population because it would raise the prices at Wal-mart..."
txgrouch2007


Ahhh protectionism, so much better than suicide.

That''s exactly what I''m calling for.

The population will get used to it.

Because they will live in true long term prosperity, instead of short term glee.

Freedom, justice, equality, prosperity.

Americans love it.

A lot of others don''t.
ST

"There were so many reasons that justice might fail that we chose not to pursue it."
SearingTruth

A Future of the Brave

[firehose12]

Bailouts are getting old before they start.

You die, well die !

Communism and its best freind Socialism will show they die in the long run.

We see our stock market didnt respond to taxpayer gifts sent to banks.

Leave things healthy - if you die, go die.

Alternative ? get smart.

US autoworkers = $78 per hour. most blue-collar and no education.

CEO''s and the private jets - Lobster lunches etc, come on people...enough is enough.

Why bail this mess out ?

[staplesla]

These bailouts are a joke. We''ve already given away $2 trillion but haven''t fixed the underlying problem which started this - housing. We must stop rewarding poorly managed companies with bailouts that have no oversight. All these execs seem to care about is vacationing with our money, and today we learn the automaker execs travelled in style to D.C. to beg us for this money.

I hear it argued that we must save the automakers to save jobs. But the total number of jobs provided by automakers and those dependent upon services to automakers account is only 846,000 positions. Yes this sounds big, but Walmart alone has 1.4 million employees. And furthermore, the automakers stated auto sales will be down to 10 million annually (from the 15 million last year). That to me says job losses/consolidation regardless of whether they get the money. And furthermore, they stated this money will only get them through March. Why are we not investing in our roads, alternative forms of energy, etc?....each which would create millions of jobs?

Any bailout should be spent on fixing the housing crisis or it won''t matter if GM/Ford/Chrysler survive. If you can''t afford your mortgage payment, you surely aren''t going to buy a car.

If we don''t stop this bailout, this will set a precedent for the airlines to be next, then hotels/travel industry, then restaurants, etc. It''s got to stop.

Contact Congress and tell them to vote no.
http://www.emailthecongress.com

[txgrouch2007]

It''''s up to us fellow Americans. Do we value our freedom and humanity so little that we no longer deserve them? Or will we once again stand to defend and uphold American liberty?"
SearingTruth
Posted by Humanavance at 10:26 PM : Nov 20, 2008

Sorry, the elections are over. The masses voted to stay on the path to destruction, by re-electing most of the members of Congress who are herding us down that path.

You didn''t answer my question = WHAT revolutionary new technology has been introduced since 1990? None.

Yes, we COULD stop imports from the slave labor nations. That would be called PROTECTIONISM, which is roundly opposed by the vast majority of the population because it would raise the prices at Wal-mart.

The Wal-mart mentality has doomed us to remain uncompetitive in the global market. The only way to prevail over the slave labor nations is to invent a new technology that they don''t know how to copy.

They can''t make the slaves make things that the masters don''t know how to make. This was the root of our prosperity in the past. We were making things that other countries didn''t know how to make.