Stock Market Plummets, Auto Stocks Among Hardest Hit
DETROIT (WWJ/AP) - The stock market is finishing its worst day since the financial crisis.
The Dow Jones industrial average plunged more than 500 points Thursday. Investors are concerned that the U.S. economy will enter another recession and that Europe's debt problems are not closed to being solved.
Major stock indexes fell more than 4 percent.
The Dow is closing with a loss of 513 points, or 4.3 percent, to 11,384. It was the worst day for the Dow since October 22, 2008. The S&P 500 is down 60, or 4.8 percent, to 1,200. The Nasdaq is down 137, or 5.1 percent, to 2,556.
Leon LaBrecque is the managing partner and founder of LJPR in Troy, a firm managing over $300 million in assets. He says all is not doom and despair.
"This is a feedback loop. And when I say a feedback loop I mean that you're looking at when prices go down it makes them more atractive," said LaBrecque.
"So, stocks are on sale ... they're off 12 percent right now. You've got oil down, that's good. Really, you've got all kinds of things looking better than worse," he said.
Twenty stocks fell for every one that rose on the New York Stock Exchange. Volume was very heavy at 7.5 billion shares.
Among the hardest hit have been automotive stocks. And, what many local investors would like to know is why, amidst recent glowing profit announcements, are shares of GM and Ford plummeting?
WWJ automotive analyst John McElroy says one reason is what the UAW will do with its holdings.
"The UAW VEBA owns massive amounts of shares in both GM and Ford, and Chrysler for that matter. And at some point it's going to have to start selling those shares to pay for health care for UAW employees and retirees, and that's a second drag on those stock prices," said McElroy.
McElroy who says three months of slower sales, combined with continued global economic concerns have caused investors to pull back from auto stocks.
"Right now is afraid of the automotive stocks, and that's why we see them down," he said. "The stock market prices stock based on what it thinks its going to happen in the future. And, when you look at the weakness in the American economy and the fact that we've had three months of soft car sales, that market's concerned that the automotive is not going to do that well maybe in the third and fourth quarter."
"Most analysts believe that the Detroit Three are going to be enormously profitable. So, in the long run you could probably make a good argument that investing in automotive stock is probably not a bad way to go. But, certainly in the short-term, those stocks are getting hammered," McElroy said.
For the year, General Motors stock is down over 25 percent, and Ford is off more than 20 percent.
- More on the market from CBS News -
The Associated Press contributed to this report.
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