Dow Industrials Head For Fifth Straight Loss As Autos Weigh
NEW YORK (MarketWatch) -- U.S. stocks declined Tuesday afternoon, abandoning earlier attempts at gains, after economic reports showed a drop in gross domestic product for the third quarter and more trouble in the housing market.
Worries about the viability of the U.S. auto industry also weighed, with consumer discretionary shares fronting the broad market retreat.
"The end-of-year rally, Santa Claus rally - or whatever you want to label it as - was cut short last week. A lot of that had to with the fact we're still seeing turmoil in the auto sector," said Peter Cardillo, chief market economist at Avalon Partners. .
Shares of General Motors Corp. and Ford Motor Co. were each down more than 16% after both automakers drew downgrades from two major ratings agencies after Monday's close. Standard & Poor's said the risk of bankruptcy remains high, regardless of government loans. .
After declining the last four sessions, the Dow Jones Industrial Average turned tail on earlier gains to extend its losing streak. The blue-chip index was lately down 105.69 points, or 1.3%, at 8,414.08, with 27 of its 30 components posting afternoon declines.
On Capitol Hill, Vice President-elect Joseph Biden said Barack Obama's transition team is still negotiating the details of its economic-stimulus plan with congress, with a deal not yet complete. .
"If the stimulus plan is as big and bold and timely as we hope it will be, it could change the playing field for equity markets and the outlook for the economy as we go through the next year," said Michael Sheldon, chief market strategist at RDM Financial Group.
The S&P 500 shed 9.57 points, or 1.1%, to stand at 862.06.
Consumer discretionary, utilities and information fronted the sector losses among the S&P's 10 industry groups, with telecommunication services and health care hit the least.
Bucking the negative trend among financial shares, ProLogis gained 13% after the real estate investment trust said it's selling its operations in China and property fund interests in Japan to GIC Real Estate for $1.3 billion, plus assumed liabilities.
And, shares of CIT Group Inc. gained 6.5% after the commercial-finance company said it entered into definitive agreements with the U.S. Treasury Department to tap $2.33 billion in Troubled Assets Relief Program funds.
The technology-laden Nasdaq Composite lapsed 16.55 points, or 1.1%, to 1,515.8. .
Trading volume was thin, as expected for the holiday-shortened week. On the New York Stock Exchange, more than 650 million shares traded, with decliners passing advancers nearly 2 to 1. On the Nasdaq, 262 million shares traded, and decliners topped advancers 9 to 5.
Crude futures fell, furthering a 6% slump in the previous session, as gloomy economic news fueled worries of weaker energy demand. The contract for February delivery fell 93 cents to $38.98 a barrel on the New York Mercantile Exchange. .
Gold futures also fell, with the spot month closing down $9.1 to finish at $838.10 an ounce. .
The U.S. dollar gained, with the dollar index at 81.31 from 81.227 in late North American trading Monday. .
U.S. real GDP for the third quarter fell at a 0.5% annualized rate, unrevised from the prior estimate, the Commerce Department said. The contraction was in line with economists' expectations.
The indexes had added to earlier gains after two separate reports on the troubled housing market. They later reversed lower.
The Commerce Department estimated the sale of new homes fell to more than 17-year lows in November. .
A separate report had the sales of existing homes falling 8.6% last month, with home prices falling at their most rapid pace on record.
Consumer sentiment improved in December, rebounding from multi-decade lows, according to a survey released by Reuters and the University of Michigan.
Active issues
Shares ofTextron Inc. lapsed 18.8% after the company late Monday lowered its adjusted fourth-quarter earnings outlook and said it would trim about 5% of its worldwide workforce.
Discussions between Walt Disney Co. and Hong Kong officials are under way over the possible expansion of Hong Kong Disneyland, which may include adding attractions that would be unique to the Hong Kong venue, The Wall Street Journal reported.
Also in the headlines, General Dynamics Corp. said late Monday its Electric Boat unit and Northrop Grumman Shipbuilding, a unit of Northrop Grumman Corp. , received a $14 billion contract from the U.S. Navy to build eight Virginia-class submarines.
Unisys Corp. , trading as a penny stock, advanced 43.4% after its late Monday announcement that it would act to reduce costs, with the steps to include laying off about 1,300 workers.
Asian markets dropped sharply Tuesday in thin trading as investors rushed to take profits ahead of the holidays. European markets advanced.
By Kate Gibson