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Stocks fell sharply Monday as recovery plans from General Motors and Chrysler were rejected by the Obama administration’s autos task force, spurring fears of bankruptcies in the sector.
The Dow Jones Industrial Average was down more than 200 points, or nearly 3 percent, and all 30 Dow stocks were lower.
The S&P 500 and Nasdaq were also down about 3 percent.
This comes after stocks logged their third straight up week last week. The Dow ended the week up 21 percent from its recent bottom, the index's fastest recovery of that magnitude since 1938.
General Motors [GM
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] shares tumbled more than 20 percent after the surprise ouster of CEO Rick Wagoner, who was at the helm during the company's rapid decline in the past five years, in exchange for more bailout funds. Wagoner's resignation was requested by former investment banker Steve Rattner, who headed the auto panel.
Both GM and Chrysler could now face bankruptcy as hopes of a government handout diminished, but GM and Chrysler do have one last chance to convince the task force that their plans are viable.
Auto-parts maker American Axle [AXL
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] tumbled 20 percent.
In other bailout news, Treasury Secretary Timothy Geithner revealed Sunday that the government still has $135-billion pot earmarked for bank bailouts from the original $700 billion TARP money, but wouldn’t confirm whether it will need to ask Congress for more.
Still, bank stocks struggled, with Bank of America [BAC
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] down more than 10 percent. Fellow Dow components Citigroup [C
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] and JPMorgan [JPM
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] also declined.
Meanwhile, in Europe, the banking sector suffered more body blows as Swiss bank UBS was expected to announce further writedowns and job cuts and Spain was forced to bail out its first bank, Caja Castilla la Mancha.
The largely negative start to the week will weigh on world leaders as they head to the G20 meeting in London. The meeting is expected to focus on restoring growth to the global economy by the end of 2010, the Financial Times reported quoting a draft communiqué.
In M&A news, shares of CF Industries [CF
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] skidded after the fertilizer maker's board rejecteda $3.8 billion takeover offer from Canadian rival Agrium [AGU
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This Week:
MONDAY: Fed's Bullard, Duke speak
TUESDAY: Chicago PMI; consumer confidence; Fed's Plosser speaks; Earnings from Lennar, Borders
WEDNESDAY: Auto sales; weekly mortgage applications; construction spending; ISM manufacturing index; pending-home sales
THURSDAY: ECB announcement; weekly jobless claims; factory orders; Earnings from Rite Aid, RIMM
FRIDAY: March jobs report; ISM services index; Bernanke speaks
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