Stocks closed lower as investors worried about the global economic downturn and enthusiasm for China's deep-pocketed stimulus plan faded.
After an initial pop, the market turned lower and steadily declined throughout the day. The Dow Jones Industrial Average shed more than 1 percent, as did the Standard & Poor's 500 index. The Nasdaqlost more than 2 percent.
"The initial reaction was great — this plan is going to boost China's economy, emerging markets will continue to grow," said Alan Lancz, president of Alan B. Lancz & Associates in Toledo. But "the implications to it — it's not a cure-all for the systemic risks still within our credit markets — that's probably why we didn't get any follow-through," Lancz said.
Lancz said his firm has increased its equity exposure over the past month, dropping their cash position to 30 percent from 35 percent. Still, he says, there's no reason to hurry.
"When the tech bubble burst in March 2000, it took 2 1/2 to 3 years for us to recover and get back to a bull market," he said, adding: "The tech bubble is nothing like the systemic problems we have here."
China announced this weekend plans to pump 4 trillion yuan ($586 billion) into its struggling economyin order to boost domestic demand from the world's fourth-largest economy. It also announced a shift in monetary policy, which it described as, "moderately easy."
Commodities stocks rallied world-wideamid anticipation that China's plan, which includes investment in infrastructure, will boost demand for raw materials.
Alcoa continued to lead the Dow industrials even as many components turned lower.
McDonald's shares also advanced after the fast-food chain reported global same-store sales jumped 8.2 percentin October, better than analysts had expected. U.S. same-store sales rose 5.3 percent. The only negative in the report, analysts noted, was that foreign exchange started to negatively impact the company in some overseas markets.
But General Motors shares got hammered, dragging on the Dow, after Deutsche Bank decimated its price target to zero, saying the auto maker may not be able to continue operating through December if it doesn't get government help.
American International Group , which is no longer part of the Dow, jumped more than 25 percent following news that the U.S. government has restructured its bailout of AIG, taking a $40 billion stake in the insurer.
AIG this morning reported a larger-than-expected loss of $3.42 a share, or $9.24 billion, for the quarter — analysts had expected a loss of just 90 cents a share.
Also in the financial sector, Citigroup is planning to buy an unnamed U.S. regional bank after being thwarted in its pursuit of Wachovia, the Wall Street Journal reported.
The whole financial sector took a beating today as investors worried about declining asset valuesand future revenue potential. Goldman Sachs dropped to a five-year low; Morgan Stanley also fell sharply.
And HSBC reported a profit in its latest quarter but projected a downturn for the near- and mid-term.
Indeed, the buzz is that another wave of layoffs is on the way for Wall Streetas firms budget for next year. Projections indicate that up to 70,000 jobs could be lost, the Financial Times reported.
Tech stocks were among the hardest hit, dragged down by Dish Networks after the satellite-TV provider reported its profit tumbled 54 percent amid declining subscriber rolls, and Google.
Google skidded after Microsoft announced a search partnership with Sun Microsystems . Under terms of the agreement, users of Microsoft's Internet Explorere Web browser who download Sun's Java technology platform will also be given the option to download the MSN Toolbar, giving them quicker access to Microsoft's search engine. Earlier this year, Microsoft secured a deal with Hewlett-Packard to have the MSN toolbar installed on all new HP PCs in the U.S. and Canada, starting in January.
Elsewhere, Circuit Cityfiled for bankrupcty protection a week after the No. 2 electronics retailer announced plans to close nearly 200 stores and eliminate 17 percent of its work force.
Shares of rival Best Buy advanced.
UPS and FedEx rallied following news that rival DHL would shut down its domestic-shipping operations in the U.S. and lay off nearly 10,000 employees.
On the political front, President-elect Barack Obama plans no new cabinet announcementsthis week, a spokesman said.
MONDAY: Bond market closes early ahead of Veterans Day; Earnings from AIG, Starbucks
TUESDAY: Government offices, bond market closed for Veterans Day; Earnings from TJX
WEDNESDAY: Weekly crude inventories; Fed's Stern speaks; Earnings from Macy's, Applied Materials
THURSDAY: Weekly mortgage applications; weekly jobless claims; international trade; Fed's Plosser, Stern speak; Treasury Budget; Earnings from Wal-Mart, Nordstrom, Kohl's
FRIDAY: Import/export prices; retail sales; business inventories; consumer sentiment; natural-gas inventories; Earnings from Abercrombie & Fitch, JCPenney
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