Stocks Tumble Amid Dim Prospects for Autos
Stocks declined Tuesday amid worries about the fate of the auto industry as a bailout grows increasingly unlikely.
About a half hour before the opening bell, there was buzz in the market that there may be some foreign interest in gold, which boosted commodities and stocks. The dollar declined.
But the market was preoccupied with the auto bailout hearings on Capitol Hill, which resumed this morning.
>> Watch CNBC's live-streaming video of the hearings.
"The uncertainty around the auto makers is weighing heavy" on the market, Tim Mole, head of CFD's at SVS Securities, told CNBC. It's a "gauging point of the U.S. economy," he added.
The House Financial Services Committee gets its chance to grill the heads of the Big Three auto-makersduring today's hearing.
Shares of both General Motors and Ford dropped more than 10 percent. In the past 12 months, GM shares have lost more than 90 percent of their value and Ford is down more than 80 percent.
On Tuesday, auto makers warned that the industry was on the brink of disasterin their plea for a $25 billion aid package.
"This is about much more than just Detroit," GM CEO Rick Wagoner said in his testimony. "It's about saving the U.S. economy from a catastrophic collapse."
Meanwhile President-elect Barack Obama came under pressure from chief executives of leading U.S. companies to implement a fiscal stimulus package and name his economic team.
One of the bailout recipients, American International Group, will pay roughly $3 million to several executives under deferred compensation plans that are being terminated, according to a regulatory filing. The insurer halted plans last week to pay $503 million in deferred compensation.
Citigroup tested a new low, hitting $7.75 a share before rebounding above $8, as investors continued to punish the stock amid concerns that the 52,000 job cuts announced this week indicate worse management than previously thought.
(I want money, money: Click on the video at left to see Kiss frontman and entrepreneur Gene Simmons ring the opening bell.)
Yahoo took another 20-percent dive after CEO Jerry Yang stepped down and as Microsoft CEO Steve Ballmer emphasized that the software giant was only interested in buying the company's search business, not the whole company.
In economic news, consumer prices fell 1 percentin October, the biggest drop since 1947. Excluding volatile food and energy costs, core CPI slipped 0.1 percent. Both gauges fell more than expected.
Meanwhile, housing starts came in worse than expected, falling 4.5 percentto a record 791,000 annual rate. It was the lowest reading since the measure was created in the late 1940s. An earlier report showed mortgage applications fell to their lowest level in nearly eight yearslast week.
Crude oil rose slightly, trading just shy of $55 a barrel, after the EIA reported that crude inventories increased by 1.6 million barrels last week, twice of what economists had expected.
BJ's Wholesale reported its profit rose 24 percentas discount stores continued to benefit from shoppers' tightening grip on their purse strings. The wholesale club also raised its full-year forecast.
One note about Tuesday's trading: After several failed attempts at a rally, stocks seemed to take off out of nowhere right around 3 p.m., propelling stocks to a solid gain. Art Cashin, floor director at UBS, called it "The Bud Hypothesis," suggesting that the Inbev takeover of Anheuser-Busch, which closed yesterday, meant that index funds had to redeploy their investments in Anheuser stock into the 499 other stocks in the S&P 500.
Stericycle replaced Anheuser in the S&P 500.
WEDNESDAY: Fed minutes; Fed's Kohn speaks
THURSDAY: Weekly jobless claims; leading indicators; Philly Fed manufacturing survey; natural gas inventories; Fed's Bullard speaks; Earnings from Gamestop, Dell and Gap
FRIDAY: Fed's Plosser speaks; Earnings from Heinz
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