Stocks slumped today, with the Dow Jones Industrial Average finishing just above its Nov. 20 closing low.
The reason was increasing worry that the recession is gaining strength around the world and that efforts to stimulate economies in the United States and elsewhere won't work.
The blue chips closed down 298 points, or 3.8%, to 7,552.60. That was 31 hundredths of a point above the Dow's Nov. 20 close of 7,552.29, its lowest close of the current bear market.
The Standard & Poor's 500 Index was off 38 points, 4.6%, to 789, its lowest close since Nov. 20. The Nasdaq Composite Index was off 64 points, or 4.2%, to 1,471, its lowest close since Jan. 20.
It was the Dow's fifth loss in the last six sessions and fourth in six sessions for the Nasdaq and S&P 500.
"There’s a growing sense that no matter who’s in office, no matter how much they spend and on what, it’s going to be a long, painful process to get out of this situation and restore the economy to normalcy," Michael Shinnick, manager of the $100 million Wasatch-1st Source Long/Short Fund, told Bloomberg News.
While the Dow came close to falling below its Nov. 20 low, the S&P 500's close was 4.9% above its Nov. 20 low. The Nasdaq finished 11.7% above its Nov. 20 close. More selling pressure is expected on Wednesday. A big question is how the markets view the survival plans submitted late today to the government by General Motors (GM, news, msgs) and Chrysler Group.
GM said it would need $16.5 billion in new aid -- including $2 billion in March and $2.5 billion in April -- to avoid bankruptcy. Chrysler said it needed $5 billion in new aid. Both saw severe retrenchment in their operations. GM said it would concentrate on Chevrolet, Cadillac and Buick and GMC truck brands.
GM was off 12.8% to $2.18, the worst performer among the 30 Dow stocks. Rival Ford (F, news, msgs) was off 3.4% to $1.70.
In addition to the automakers, banks and energy companies all saw their shares fall. Bank of America (BAC, news, msgs) was down 12% to $4.90. Citigroup (C, news, msgs) was down 12.3% to $3.06.
Meanwhile, Exxon Mobil (XOM, news, msgs) and Chevron (CVX, news, msgs) were off 4.4% to $71.28 and 5.1% to $66.18, respectively, subtracting 54 points from the Dow.
The Dow Jones Transportation Average ($DJT) slumped 5.2% to 2,803 -- 3.5% below its Nov. 20 closing low -- with all 20 stocks in the index showing losses.
Only one of the 30 Dow stocks was higher: Wal-Mart Stores (WMT, news, msgs), up 3.7% to $48.24 because of better-than-expected quarterly earnings.
Only 19 S&P 500 stocks finished with gains, along with just one stock in the Nasdaq-100 Index ($NDX.X): Teva Pharmaceuticals (TEVA, news, msgs), up 4% to $45.78. The index was off 50 points, or 4%, to 1,187.
The Dow is now down nearly 14% this year after a 33.8% decline in 2008. The S&P 500 is off 12.6% for the year, with the Nasdaq off 6.7%.
U.S. stocks were hardly alone in feeling pain today. Japan's Nikkei 225 index ($N225) fell 105 points, or 1.4%, to 7,646 -- less than a half-percentage point above of its April 2003 low. Stocks in Europe plunged as well.
"Some people think it's bullish that we've been near the lows a couple times and not broken through yet, but I tend to think the other way," Chip Hanlon, president of Delta Global Advisors, told The Wall Street Journal. "The more times you test a low, the odds should go up that it's going to give way."
President Barack Obama signed the $787 billion economic stimulus package into law this afternoon, but there was skepticism that the bill would do much, if anything, to give an immediate boost to the economy.
"I guess there's a lot of second thoughts about the stimulus package from the public," Peter Cardillo, chief market economist at Avalon Partners, told CNNMoney.com. "Obviously, there's a lot of fear out there."
Investors also got the jitters from Japan after its government reported Monday that the world's second-biggest economy shrank an annualized 12.7% in the fourth quarter from the previous three months -- the worst quarterly decline since 1974. Japan was hit hard by a 13.9% quarter-to-quarter decline in exports.
The MSCI Asia Pacific Index finished down 2.7%, and Hong Kong's Hang Seng Index ($HSIX) decreased 3.8%.
European stocks also fell in today's session. The Dow Jones Stoxx 600 Index lost 2.6%. Germany's Dax Index ($DE:DAX) was off 3.4% to 4,217, and London's FTSE 100 Index ($GB:UKX) dropped 2.4% to 4,034.
GM, Chrysler plan for a smaller U.S. car market
In General Motors' 117-page plan, the company said it would concentrate only on Chevrolet, Cadillac, Buick and GMC brands.It would sell or shut down its Hummer business this year and its Saturn business in 2011. Saturn, headquartered south of Nashville, was touted in the 1980s as GM's response to Japanese competition.
GM also said it would lay off 47,000 workers and shut down five factories.
GM cut down its economic and sales projections. It assumed last fall that the U.S. economy would shrink by 1% in 2009; it now sees a 2% economic decline. U.S. car sales from all manufacturers may be just 9 million to 10.5 million units this year, down from nearly 17 million units in 2005.
- Smart Spending blog: Off to car heaven: Saturn, Saab, Hummer
But GM said it believed it could break even with domestic sales hitting 11.5 million to 12 million.
In asking for $5 billion in new aid, Chrysler Group promised to cut $700 million in fixed costs, lay off 3,000 workers and discontinue three unnamed models.
In December, the company received $4 billion in government to help avoid bankruptcy and said it might need $3 billion more in April.
The company said it would start paying the government back in 2012. It assumes that the market for new vehicles in the U.S. will be about 10.1 million units a year for the indefinite future.
The plan came as the United Auto Workers union said it had negotiated new national contracts with Chrysler, Ford and General Motors. The UAW and the automakers are still negotiating a new health care plan as well.
| Tues. | Fri | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $34.93 | $37.51 | -$2.58 | -16.19% | -21.68% |
| Heating oil (per gallon) | $1.1864 | $1.3000 | -$0.1136 | -17.27% | -15.60% |
| Natural gas (per million BTU) | $4.2030 | $4.4520 | -$0.2490 | -4.84% | -25.24% |
| Unleaded gasoline (per gallon) | $1.1118 | $1.2063 | -$0.0945 | -12.38% | 10.28% |
Crude and interest rates fall, gold rises
Today's selling pushed crude oil below $35 a barrel in New York as traders worried that the recession would dampen gasoline demand in the United States and elsewhere.Crude oil was down 6.9% to $34.93 a barrel in New York, and analysts said oil could continue to fall. Supplies of oil in the U.S. are reportedly so plentiful that storage centers have no more space for the commodity and traders are selling off barrels to make room, Thomson Reuters reported today. Wholesale gasoline, heating oil and natural gas fell as well.
Gold closed up 2.7% to $967.50 an ounce, and many analysts believe it will soon top $1,000 an ounce. Silver was up 2.8% to $14.01. Gold is up 9.4% this year; silver is up nearly 21%.
Today's sell-off also produced a rally in the dollar, which was higher against the pound, the euro and the yen. The yield on the 5-year Treasury note fell to 1.674% this afternoon from 1.864% on Friday.
Wal-Mart beats the Street
Wal-Mart was about the only stock worth cheering about.The retail giant reported fourth-quarter profit of $3.79 billion, or 96 cents per share, a 7.4% decline from the $4.01 billion, or $1.02 per share, the company earned in the same quarter a year ago.
Stock Charts (Year)
Wal-Mart Stores
Wal-Mart said sales rose 1.7% to $108 billion, just shy of the consensus estimate of $108.7 billion.
In January, Wal-Mart had forecast earnings between 91 cents and 94 cents per share, down from previous guidance of between $1.03 and $1.07 per share.
Wal-Mart has been thriving amid the recession as consumers have pulled back on spending and turned to the discounter for savings and deals.
"Ideally positioned as the low-cost leader, with rising unemployment and a more price-conscious consumer today, (Wal-Mart's) earnings performance should outperform its peers," JPMorgan Chase analyst Charles Grom wrote in a research note.
Wal-Mart forecast earnings between 72 cents and 77 cents for the current quarter and annual earnings of between $3.45 and $3.60 per share. Analysts are looking for 77 cents per share for the quarter and $3.59 per share for the year.
Today's economic data
Manufacturing in the New York region contracted further in February.The New York Federal Reserve's Empire State Manufacturing Index fell to a reading of negative 34.7 in February, a record low for the index. The February reading fell from a reading of negative 22.2 in January.
Only 16% of respondents polled said conditions in the industry had improved, while 51% said things had gotten worse. Readings below zero indicate contraction in the sector.
"The retreat of the Empire State index, coming on the heels of a deterioration in consumer confidence last Friday, suggests that a definitive bottom is not yet in sight," Nomura Chief Economist David Resler wrote in a note to clients.
Medtronic profit rises
One stock that did do well today was medical device maker Medtronic (MDT, news, msgs).Medtronic earned $723 million, or 65 cents per share, a surge from the $77 million, or 7 cents per share, in the same quarter a year ago. On an adjusted basis, Medtronic earned 71 cents, up from 63 cents a year ago. Analysts had been looking for 70 cents per share.
Shares rose 5.3% to $34.56.
Sales rose 3% to $3.49 billion in the quarter.
The case of the missing $8 billion
The Securities and Exchange Commission accused Robert Allen Stanford, chief of the Stanford Financial Group, a large Houston money-management firm, today of conducting "a massive ongoing fraud" in the sale of about $8 billion of high-yielding certificates of deposit held in the firm’s bank in Antigua.The complaint, filed in federal court in Dallas, alleges that Stanford and two associates -- James M. Davis, a director and chief financial officer of Stanford Group and the Antigua-based bank affiliate, and Laura Pendergest-Holt, the chief investment officer of both organizations -- misrepresented the safety and liquidity of the CDs, which do not come with any federal deposit insurance.
The CDs were sold by Stanford International Bank through the firm’s brokerage business, which is based in Houston. Both the bank, which claims $8.5 billion in assets and 30,000 clients in 131 countries, and the brokerage unit, which operates about 30 offices in the United States, were named in the SEC suit. Stanford Financial asserts that it advises about $50 billion in assets.
In its complaint, the SEC said it could not account for the $8 billion in assets that were housed in the Antigua bank after issuing subpoenas for bank records and to various witnesses.
Liberty Media a white knight for Sirius
Satellite radio producer Sirius (SIRI, news, msgs) was saved by investor Liberty Media (LCAPA, news, msgs) from bankruptcy today. Liberty Media owner John Malone agreed to invest $530 million in Sirius.Sirius will reportedly have to hand over an important equity stake, possibly as much as half of its outstanding shares. Liberty has covered the $175 million debt service payment due from Sirius today.
Sirius has thus avoided making a deal with satellite mogul Charles Ergen of Echostar (SATS, news, msgs), who owns part of its debt.
Sirius shares rose 52.5% to 16 cents.
Trump Entertainment files for bankruptcy
Donald Trump's casino operations Trump Entertainment Resorts (TRMP, news, msgs) filed for Chapter 11 bankruptcy protection today, The Wall Street Journal reported.- Readers talk: Trump's latest bankruptcy
The board reportedly met late Monday to discuss the company's options.
Donald Trump, who owns 28% of the company's stock, resigned as chairman of the board of directors Friday night, and his daughter, Ivanka, resigned from the board.
Today is the deadline for the company to make a $53 million bond payment; the payment has been delayed four times since Dec. 31.
Trump had wanted to purchase the company and made an offer, he told the paper, "but the bondholders turned me down."
Andrew Rosenbaum contributed to this report.
| Tues. | Fri | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.285% | 0.290% | -0.005 | 29.55% | 147.83% |
| 5-year Treasury note yield | 1.674% | 1.864% | -0.190 | -10.62% | 7.93% |
| 10-year Treasury note yield | 2.662% | 2.882% | -0.220 | -6.40% | 18.63% |
| 30-year Treasury bond yield | 3.486% | 3.682% | -0.196 | -3.25% | 29.54% |
| Currencies | |||||
| U.S. Dollar Index | 87.920 | 86.960 | 0.960 | 1.69% | 7.02% |
| British pound in dollars | $1.4255 | $1.4288 | -0.0033 | -1.80% | -3.25% |
| Dollar in British pounds | £0.7015 | £0.6999 | 0.0016 | 1.83% | 3.36% |
| Euro in dollars | $1.2604 | $1.2798 | -0.0194 | -1.65% | -10.03% |
| Dollar in euros | € 0.7934 | € 0.7814 | 0.0120 | 1.68% | 11.15% |
| Dollar in yen | 92.39 | 91.66 | 0.73 | 2.80% | 1.92% |
| Canadian dollar in U.S. dollars | $0.792 | $0.805 | -$0.0137 | -2.77% | -3.21% |
| U.S. dollar in Canadian dollars | $1.264 | $1.242 | $0.0224 | 2.84% | 3.31% |
| Commodities | |||||
| Gold | $967.50 | $942.20 | $25.30 | 4.21% | 9.41% |
| Copper | $1.4425 | $1.5545 | -$0.11 | -1.77% | 2.30% |
| Silver | $14.0100 | $13.6250 | $0.39 | 11.50% | 20.63% |
| Corn | $3.4925 | $3.6325 | -$0.14 | -7.85% | -14.19% |
| Crude oil (NYMEX) (per barrel) | $34.93 | $37.51 | -$2.58 | -21.68% | -21.68% |