Wall Street Stalls Amid Car Industry Fears

Dow Drops 254 Points After Obama Administration's Rejection Of GM, Chrysler Turnaround Plans

(CBS/AP)  Wall Street's big March rally is officially on hold after the White House rejected turnaround plans from General Motors Corp. and Chrysler and gave investors a reality check on the economy.

Major indexes fell about 3 percent including the Dow Jones industrial average, which lost about 254 points but finished well off its lows. Financial stocks weighed heavily on the market amid worries that banks will need fresh injections of capital.

Fears of an automaker bankruptcy have been looming over investors for months, and the latest developments, which included the removal of GM's CEO Rick Wagoner, made the market even more uneasy not only about the industry, but the overall economy. However analysts said the pullback, which began with a 148-point drop in the Dow Friday, wasn't surprising after the average surged 21 percent over just 13 days.

"The market had a very significant rally off the lows," said David Katz, chief investment officer at Matrix Asset Advisors. "We think it's just taking a breather."

According to preliminary calculations, the Dow tumbled 254.16, or 3.3 percent, to 7,522.02. The Dow had been down as much as 339 points so the market's ability to end off its lows on light trading volume could signal that the market isn't ready to give up on the rally.

The Standard & Poor's 500 index fell 28.41, or 3.5 percent, to 787.53, while the Nasdaq composite index fell 43.40, or 2.8 percent, to 1,510.80.

The rally that began in early March was fed by economic and corporate reports that were starting to look more encouraging. Now, investors are taking money out of the market ahead of economic numbers this week and first-quarter earnings in the weeks ahead, fearing that disappointing data, including the government's March employment report on Friday, will set the market back.

The problems still facing automakers and banks gave investors more incentive to sell.

On Monday, President Barack Obama refused further long-term federal bailouts for GM and Chrysler, saying the companies needed to get more concessions from unions, creditors and others before the money could be approved. He also raised the possibility of controlled bankruptcy for one or both of the companies.

While the restructuring will be painful in the short term, Mr. Obama said he is confident it "will mark not an end but a new beginning for a great American industry."

In an interview with CBS' Face The Nation broadcast Sunday, Mr. Obama said the companies must do more to receive additional financial aid from the government.

"We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge - at the other end - much more lean, mean and competitive than it currently is," Mr. Obama told Face The Nation host Bob Schieffer.

"It was a pretty sharp reminder that there are some difficulties here," said Matt King, chief investment officer at Bell Investment Advisors.

Underscoring the fear that the financial industry's troubles are far from over, Treasury Secretary Timothy Geithner said Sunday during a television interview that banks would likely need considerably more money. Also over the weekend, Spain was forced to bail out a bank for the first time since the financial crisis began. The Bank of Spain took control of a small savings bank and provided $12 billion in government funds to support it.

Banks had been a driving force behind the market's rally in March and analysts now expect those shares to see some of the worst declines as investors become more conservative ahead of the first-quarter earnings reports coming up in the next few weeks. Bank of America Corp. fell 17.8 percent Monday and Citigroup fell 11.8 percent.

Many market watchers had called the recent upturn a "bear market rally," or a temporary upturn within a bear market, defined as a 20 percent decline from a peak level. Rallies within bear markets can ratchet up big gains but also can easily come crashing down.

"Twenty percent is a normal bear market rally," said Ron Weiner, president and chief executive of Westport, Conn.-based investment advisory firm RDM Financial. "Testing bottoms is a long-term process."

With the economy still deeply troubled, some analysts say the market may have gotten ahead of itself.

"I think we had a huge run up ... that was not really justified," said Peter Jankovskis, co-chief investment officer at OakBrook investments. "There are a lot of negatives right now on the horizon."

The Russell 2000 index of smaller companies dropped 13.03, or 3 percent, to 415.97.

About seven stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.5 billion shares.

[rhs648]

It is long past time that our new President cease to engage in mere feckless adornments of language and thought. We are in desperate need of tenable solutions not rhetorical flourishes bordering on ludic sentimentality. If Obama truly believes that the plans drafted by the auto companies are window dressing, he has a responsibility to the American people, to the workers in the automobile industry and to all the families of those whose livelihoods he dismisses so cavalierly to tell us, clearly, precisely and definitively what should be done and how and when and by whom. It is long past time that he primp as a college professor, asking his pupils to provide him with guidance, for no better reason than that he can hide his own ineptitude in mustering that standard.
Posted by smoknmirrors

smoknmirrors - Could this be a revolution without shots being fired? This could be a power grab. What better excuse for nationalizing major industries such as the auto industry, the banks, and insurance companies than an economy in recession. Capitalism would allow failing companies to fail. Again, perhaps this is a socialist revolution in the making.

[spaceatoms]

As they say in Washington and Hong Kong, its time for a bailout!

[sjc_1]

That is the correct spelling of facetious:

facetious
adjective
1. not meant to be taken seriously or literally: a facetious remark.

[nearl451]

the stock market is like a sail in the wind: any good news (fictitious or real) it blows one way; any bad news and it blows the other.

Only a damned fool would pin daily stock market results on long term policy decisions.

Yet hark the trolls underfoot.

[swin5]

Funny how last week the market was up and all these Obama supporters were hooting and hollering about how a new age had dawned and prosperity was here again to stay and they laughed at those of us who said hold on a minute, nothing has really changed. Now the market is down 400 points in two days, partly as a result of Obama announcing more of his hair-brained Communist ideas, and you're not hearing a peep from these people. What gives?

[johnb8888]

"Savvy investors such as Warren Buffett are banking on the fact that every stock market crash in the past 113 years, without exception, has been followed by a huge rally of between 50% and 350%!
Posted by goodusa "


Of course after the 1930 crash it took 10+ years and a major war to bring it back up.

[rhs648]

Savvy investors such as Warren Buffett are banking on the fact that every stock market crash in the past 113 years, without exception, has been followed by a huge rally of between 50% and 350%!
Posted by goodusa at 1:02 PM : Mar 30, 2009
------------------------------------------------------------
Sure, Buffett's just got to live another 10 or 11 years to see this happen...which would make him 90!
Posted by gce651

That 10 or 11 years may be all Warren Buffett needs to double or triple his wealth. How many people at his age are as sharp and energetic as Warren Buffett? Besides, he could live to be 106 and in good health like my grandfather.

[smoknmirrors]

It is long past time that our new President cease to engage in mere feckless adornments of language and thought. We are in desperate need of tenable solutions not rhetorical flourishes bordering on ludic sentimentality. If Obama truly believes that the plans drafted by the auto companies are window dressing, he has a responsibility to the American people, to the workers in the automobile industry and to all the families of those whose livelihoods he dismisses so cavalierly to tell us, clearly, precisely and definitively what should be done and how and when and by whom. It is long past time that he primp as a college professor, asking his pupils to provide him with guidance, for no better reason than that he can hide his own ineptitude in mustering that standard.

[gce651]

Savvy investors such as Warren Buffett are banking on the fact that every stock market crash in the past 113 years, without exception, has been followed by a huge rally of between 50% and 350%!
Posted by goodusa at 1:02 PM : Mar 30, 2009
------------------------------------------------------------
Sure, Buffett's just got to live another 10 or 11 years to see this happen...which would make him 90!

[gce651]

Let's see, the Republicans say that private sector corporations do things better and more efficiently than government. In the private sector category we have, banks, insurance companies, car companies...I could go on. So where is the wonderful private sector management now?
Posted by sjc_1 at 12:56 PM : Mar 30, 2009
---------------------------------------------------------
The Republi-cons only say that on the upside.
As soon as their business and economic theories begin to tank, they blame big government--which Reagan and the Bushes created much more than Clinton.

[gce651]

The headline says it all: FEAR.

What drives Wall St? FEAR and GREED!

[andejack]

It continues to amaze me how the media in general, and so many of the posters, ***** foot around the likehood that the market, and investors in America, simply do not like, or trust, the Obama Machine. The Government is going to begin making corporate management decisions? The Government, ala Geither, needs more power to make decisions regarding financial institutions? Our country is, or at least is attempting, to take quantum leaps in the direction of a more and more liberal, socialist society. That might not be so bad if there was a shred of evidence that those philosophies lead to improved welfare for people. Historic and current evidence does NOT support that ill-founded logic. Will the American people wake up in time, or is it already too late? May God help us! Our forefathers believed and entrusted. I am trying as well.

[marcodele]

I long for the peace, prosperity, and economic growth of the Bush years.

[Solarrays247]

Just another industry President Barack Obama is going to destroy? With "cap and trade" will kill the coal, oil and gas industry! DOWN with 'greedy' Capitalism is Barack's motto!
Posted by scb1111

For those of you who think government can do a better job than private enterprise, start looking for new jobs. The same is true of universal health care. Only hold onto your wallets with that one.
Posted by rhs648

You guys are the trouble and fuel the complications we in america are experiencing....Obama is not destroying anything. GM did that all by itself.....Long ago when they conspired to destroy the EV1. Time has elapsed, and since then they have produced vehicles that (yes we buy) use more gas than ever....the few cars that have gas economy either suck or are simply too expensive.
Also, they have based profits on the sales of big vehicles, not the economical cars....
Furthermore, the government has been subsidizing GM for years which is not mentioned...
The American public has given tax incentives to purchase the larger gas guzzlers, shooting ourselves in the foot....costing us in expensive fuel, repair costs, and making us look fuelish.

Face it corruption in America has become the major player in our demize as an economic powerhouse we no longer are, and probably NEVER will be again.

THANK YOU ALL FOR ******** AMERICA...

Posted by netjunkie1 at 12:42 PM : Mar 30, 2009


Great post! Honest...and....truthful.

I question whether many players out there can even tell the difference anymore between corruption and ethics/morality?

But, never say NEVER! :) I'm not ready to give up on our people.

[rhs648]

Savvy investors such as Warren Buffett are banking on the fact that every stock market crash in the past 113 years, without exception, has been followed by a huge rally of between 50% and 350%!
Posted by goodusa

This is what savvy investors do. They also have the guts, the foresight, and the risk tolerance to act upon their beliefs.

[sjc_1]

"The wealthy [already] pay more in taxes than the middle class"

Perhaps on a per person basis, but not in general tax revenue. With all the AMT provisions in the TARP and ARRA bills, many of the wealthy do not even pay the 10% required minimum. Here is a good page for reference.

http://www.irs.gov/taxstats/article/0,,id=102886,00.html

[rhs648]

Some of you guys are suffering from short-term memory loss. This economic mess was created by the very same system that you espouse. The problem is not the economic concept of free enterprise, but the people who were in charge and practicing it on Wall Street.
Posted by bajajohn1

You are partially correct. The second half of private enterprise is to let failing companies fail. New entities spring-up to provide what is needed. Circuit City went under and is hardly missed. If some banks went under, others would fill-in the gaps and the same is true of the automobile and insurance industry. Honda, Toyota, Nissan, Infinity, and dozens of other auto companies would sell more cars to take care of the gap. In fact, new car companies may fill the void. The mistake is using taxpayer money to prop-up the failing companies. It is like pouring money down an endless pit. However, it is a great opportunity for the government to nationalize certain industries.

[sjc_1]

Let's see, the Republicans say that private sector corporations do things better and more efficiently than government. In the private sector category we have, banks, insurance companies, car companies...I could go on. So where is the wonderful private sector management now?

[bajajohn1]

Some of you guys are suffering from short-term memory loss. This economic mess was created by the very same system that you espouse. The problem is not the economic concept of free enterprise, but the people who were in charge and practicing it on Wall Street.

[rhs648]

Just another industry President Barack Obama is going to destroy? With "cap and trade" will kill the coal, oil and gas industry! DOWN with 'greedy' Capitalism is Barack's motto!
Posted by scb1111

For those of you who think government can do a better job than private enterprise, start looking for new jobs. The same is true of universal health care. Only hold onto your wallets with that one.