Dow Loses Over 3% Amid Auto, Bank Fears
Stocks fell sharply Monday as investors worries about the potential for bankruptcies in the auto sector and that some big banks are going to need a lot more bailout money.
The Dow Jones Industrial Average lost 254.16, or 3.3 percent, and 28 of 30 Dow stocks closed lower.
The S&P 500 shed 3.5 percent and the Nasdaq fell 2.8 percent.
Today's pullback came after stocks logged their third straight up weeklast week. The Dow ended the week up 21 percent from its recent bottom, the index's fastest recovery of that magnitude since 1938.
Still, the Dow is up 6.5 percent for the month to date, which would be its biggest monthly gain since September 2007 if it held through tomorrow's session. The S&P and Nasdaq are up 7.1 percent and 9 percent, respectively, which would be their biggest monthly gains since 2002.
For the quarter, however, the Dow is down more than 14 percent, which would be its sixth straight down quarter, the first time that's happened since 1970.
General Motors shares tumbled 25 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, by the Obama administration in exchange for more bailout funds.
The government rejected restructuring plans from both GM and Chrysler, declaring them unsatisfactory, raising concerns that one or both could face bankruptcy. GM and Chrysler do have one last chance to convince the task force that their plans are viable.
Fritz Henderson, the interim CEO of GM, told CNBC that he thinks bankruptcy may be the best solutionfor the automaker.
Auto-parts maker American Axle tumbled 22 percent.
Attempting to assuage fears of buying American cars given the turmoil the industry is in, President Obama today announced that part of the auto-rescue plan would include protecting consumer warrantiesfrom GM and Chrysler vehicles.
In other bailout news, Treasury Secretary Timothy Geithner indicated Sunday that several big banks are going to need large amounts of assistance from the government.
Financials finished at their lows for the day: Bank of America shed 18 percent to close just above $6. Fellow Dow components Citigroup and JPMorgan lost 12 percent and 9.3 percent, respectively.
Adding to pressure on the sector, in Europe, 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 skidded 4 percent after the fertilizer maker's board rejected a $3.8 billion takeover offer from Canadian rival Agrium .
Trading was average, with about 1.51 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers by a ratio of more than 7 to 1.
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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