MARKET SNAPSHOT: U.S. Stocks Slide To 11-year Lows As Hopes For Auto Bailout Fade
Friday November 21st, 2008 / 0h07
By Nick Godt U.S. stocks nose-dived into the close Thursday, with the S&P 500 Index ending at its lowest level in more than 11 years, after it appeared unlikely Congress would quickly approve emergency loans for ailing automakers. Senate leaders said Congress would convene again the week of Dec. 8 if the automakers could come up with a new plan. "The market was looking to see this thing resolved by tomorrow," said Paul Mendelsohn, chief investment strategist at Windham Financial Services. "The fact that it won't be addressed until Dec. 8 isn't helping given the fact that economic conditions are so poor here. "It appears everything is in chaos," he added. "It's getting ugly." The Dow Jones Industrial Average (DJI) fell 445 points, or 5.6%, to end at 7,552, collapsing below a low it had made on Oct. 10 to close at a fresh five-and-a-half year low. General Motors Corp. (GM) maintained a 3% gain to close at $2.88. It earlier rallied to $4 amid hopes for a bailout. The stock had plunged more than 20% in morning trades. With concerns about a possible bankruptcy continuing to hit the stock of the auto giant, GM's financing unit GMAC applied to become a bank-holding company to access emergency cash from the government. "In a normal operating environment, this group being headed for bankruptcy would be manageable, but given where we are, a bailout plan may be necessary," said Owen Fitzpatrick, head of U.S. equity at Deutsche Bank. "Bankruptcy is not a body blow that the market could handle at this point." Ford Motor Co. (F) shares rose 10%. Another focus of concern for the market was Citigroup Inc. (C) The stock plunged more than 26% even after Saudi investor Prince Alwaleed said he would raise his stake in the bank to 5%. Market slumps to 11-year lows The broad S&P 500 (SPX) fell 54 points to 752, after crashing through its 2002 bear-market low to close at its lowest level in more than 11 years. The S&P, the market benchmark most followed by professional investors, has now lost nearly 52% since its record high close on Oct. 9, 2007. "The sick joke, that was not true for the 2000-02 bear market, is that we can now say we have seen the worse of it," said Howard Silverblatt, index analyst at Standard & Poor's. "We can only lose 48.07% more." The S&P 500 had not lost more than 50% of its value in a bear market since 1937, the analyst added. The Nasdaq Composite Index (RIXF) fell 70 points to end at 1,316. Trading volumes showed 2.2 billion shares exchanging hands on the New York Stock Exchange and 1.4 billion shares trading on the Nasdaq stock market. Decliners outpaced gainers by a margin of 15 to 1 on the NYSE and of 6 to 1 on Nasdaq. Oil below $50 Economic concerns drove a barrel of crude oil to slump below $50 for the first time in more than three years. But the move, seen more as a sign of how bad the economic outlook has become than as a positive for consumers, failed to provide much relief to the market. The energy sector plunged on the S&P, sliding more than 15%, weighed down by more than 20% drops in the likes of Chesapeake Energy Corp. (CHK), Pioneer Natural Resources Co. (PXD) and Peabody Energy Corp. (BTU) Next worst were telecoms, which fell more than 9%, and financials, which were off 9%. Underlying concerns about the battered financial sector continued to weigh on the market after Treasury Secretary Henry Paulson said the outgoing administration won't use some of the $700 billion from the Troubled Assets Relief Program to buy debt securities. "The market doesn't like that. There are so many problems to deal with, with the insurance companies likely the next shoe to drop," Mendelsohn said. On Wednesday, stocks were also crushed, with credit market-led fears and Citigroup's $17 billion balance-sheet addition punishing markets. The Dow Jones Industrial Average dropped 427 points, the S&P 500 lost 52 points and the Nasdaq Composite fell 96 points. Overseas, the pan-European Dow Jones Stoxx 600 lost nearly 4%, while the Nikkei 225 fell nearly 7% in Tokyo.
