Auto sales plunge; stocks slip

By Charley Blaine and Elizabeth Strott

Stocks were mostly lower today as very weak auto sales offered more evidence of an accelerating economic slump.

But the overall losses were light and volume was quite low. In all, the market's performance was typical for the day before a presidential election.

Trading volume is likely to be equally light on Tuesday. Futures trading is signaling U.S. stocks will open slightly lower. Stocks in Japan have opened higher in early Tuesday trading.

The Dow Jones industrials closed down 5 points to 9,320. The Standard & Poor's 500 Index was down 2 points to 966, largely because of weakness among energy stocks.

But the Nasdaq Composite Index enjoyed its fifth consecutive gain, rising 5 points to 1,726.

The market had to contend with a slew of bad news, including one of the worst months for auto sales since World War II and a report showing the biggest contraction in manufacturing activity since 1982. The government also reported a sharp decline in construction spending.

The manufacturing report suggested that U.S. energy demand will decline and pushed crude oil down 5.8% to $63.91 a barrel in New York. Energy stocks moved lower as well. Oil services company Weatherford International (WFT, news, msgs) was off 11% to $15.03 after a Goldman Sachs analyst told investors he sees declining earnings next year for oil services companies.

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AT&T (T, news, msgs) and Verizon Communications (VZ, news, msgs) were the top performers among the 30 Dow stocks, rising 3.9% to $27.81 and 3.6% to $30.75, respectively, just before the close. Wachovia analyst Jennifer Fritzsche called AT&T and Verizon "safe haven" stocks.

Walt Disney (DIS, news, msgs) and Home Depot (HD, news, msgs) were the Dow laggards, down 3.4% to $25.04 and 5.8% to $22.22, respectively. Disney reports fiscal-fourth quarter earnings after Thursday's close.

The Dow was evenly split between gainers and losers. Among S&P 500 stocks, 274 were lower, but 52 Nasdaq-100 ($NDX.X) stocks were higher; the index was flat at 1,335.

The muted performance of U.S. stocks came despite decent gains in Europe and Asia. Hong Kong's Hang Seng Index ($HSIX) was up 2.7%. Germany's Xetra Dax Index ($DE:DAX) added 0.8% to 5,027, and the United Kingdom's FTSE-100 Index ($GB:UKX) was up 1.5% to 4,443.

A 'frightening' month for auto sales

Automakers reported the worst monthly sales in at least 25 years. General Motors (GM, news, msgs) said the sales environment was the worst it had seen since World War II.

According to preliminary figures from industry sales tracker Autodata, the seasonally adjusted annual sales rate plunged to 10.6 million, the worst reading since February 1983.

"Unless you had to purchase a vehicle, it was wait and see for most consumers," David Lucas, vice president of Autodata, told CNNMoney.

Experts are worried that the weak sales and tight credit could cause the U.S. automakers to run out of cash as soon as 2009. While Ford has more cash on hand than its U.S. rivals, it is forecast to report a much larger third quarter loss than it did year ago when it releases results Friday.

Chrysler has reportedly held talks with GM as well as with the Nissan-Renault alliance about a possible merger with one of those automakers. But those talks are reportedly on hold. There has been talk that GM is seeking a loan from the Treasury Department in order to help finance a deal for Chrysler.

GM said its October U.S. sales plummeted 45% to 169,000 vehicles because of weak consumer confidence and tight credit markets. That was down from about 307,000 a year ago. The sales levels were the worst since the 1970s.

Car sales fell 34%; light truck sales dropped 51%.

Mike DiGiovanni, GM's executive director of global market and industry analysis, said the credit crisis and financial market turmoil are affecting the industry to a "frightening" level.

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If GM's sales were adjusted for population growth, October would be the worst month of the post-World War II era, he said. To try to combat the problem, GM is starting its annual Red Tag sale on Tuesday. It normally starts in mid-November.

In an interview on Bloomberg Television, DiGiovanni said the entire industry was in turmoil. The biggest problem all automakers face, he added, is the buyer's struggle to get a car loan. "You can't have an auto industry without borrowed money."

Ford Motor (F, news, msgs), meanwhile, sold 132,278 light vehicles last month compared with 189,515 a year ago. The numbers include sales of Volvo vehicles. Ford, Lincoln and Mercury car sales were off 27%, while light truck sales for the three brands were down more than 30%.

Toyota (TM, news, msgs) sold a total of 152,101 vehicles, down from 197,592 in October 2007. The drop included a 34% drop in light truck demand, while car sales fell 15%.

The vast majority of Toyota models posted double-digit declines for the month. Notable exceptions included sales of the Corolla, whose sales rose 6.1%, and the Sequoia sport utility vehicle, which posted a 21% gain.

Honda Motor (HMC, news, msgs) sold 85,864 vehicles as its truck sales fell 29%. But sales of cars from its Acura luxury division rose 6%.

Chrysler, which sells the Chrysler, Dodge and Jeep brands, posted a 35% drop in sales and was one of the few automakers to report a drop in sales from September.

GM shares were down 2.4% to $5.65, and Ford was down 2.7% at $2.13. Toyota was up 0.8% to $76.66 and Honda was off slightly to $24.74 in New York.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$63.91	$67.81	-$3.90	-5.75%	-33.41%
Heating oil (per gallon)	$1.9828	$2.0842	-$0.1014	-1.17%	-25.16%
Natural gas (per million BTU)	$6.8380	$6.7830	$0.0550	0.81%	-8.62%
Unleaded gasoline (per gallon)	$1.3625	$1.4959	-$0.1334	-5.47%	-45.30%

MasterCard, Viacom results cheer Street

After the close, shares of MasterCard (MA, news, msgs) jumped nearly 10% to $158.10 after the company reported better-than-expected quarterly earnings. The stock had fallen 2.7% to $143.89 in regular trading.

MasterCard, which runs the second-largest credit card network after Visa (V, news, msgs), earned $322 million, or $2.47 a share, excluding a one-time charge, up from $322 million or $2.32 a share a year ago. Analysts had expected earnings of $2.22 per share, Reuters said.

The charge, however, was big: $515.5 million to settle antitrust litigation with Discover Financial Services. As a result, the company reported a loss for the quarter using regular accounting standards of $194 million, or $1.49 per share.

MasterCard shares have fallen 33% this year and are down 55% from their $320 peak on June 2.

Separately, Viacom (VIA, news, msgs), which owns MTV Networks and the Paramount movie studio, said third-quarter earnings fell 37% because of an intensifying advertising slump. Year-ago results were boosted by the success of its movie "Transformers."

Viacom earned $401 million, or 65 cents a share, from $641 million, or 96 cents a year ago. Analysts had expected 61 cents a share in earnings. Revenue rose 4% to $3.4 billion in part because of strong sales of the Rock Band video game.

But investors pushed the shares up 1.3% after hours to $21.35 after the company said it expects to invest more in its MTV business to boost ratings. The stock had fallen 1.7% to $21.08 in regular New York Stock Exchange trading.

Construction and manufacturing lag

Construction spending fell 0.3% in September, better than economists' expectations of a 0.8% drop. Spending was up 0.3% in August.

The manufacturing sector looked much worse, though. The Institute of Supply Management's manufacturing index fell to a reading of 38.9 in October, the worst level since September 1982.

The organization said manufacturers were hurt by the financial crisis, interruptions from Hurricane Ike and "the lagging impact from higher oil prices."

The October reading was down from 43.5 in September and worse than economists' expectations of a 41.5 reading.

European outlook darkens

The European Commission today said economic growth will slow to 0.1% in 2009. That's the worst growth for the region since 1993.

"The economic horizon has now significantly darkened," European Economic and Monetary Affairs Commissioner Joaquin Almunia said in a report. "We need a coordinated action at the EU level to support the economy similar to what we have done for the financial sector."

The labor market is expected to slump further next year, the EU forecast said, with unemployment in the euro-zone climbing to 8.4% from a decade low of 7% at the end of 2007. In actual numbers, that means about an additional 2 million people out of jobs in the region.

Meanwhile, a survey released by the National Association of Business Economists this morning showed a similar outlook for the U.S.

Of the 102 economists polled, 79% said the U.S. economy will grow less than 1% in 2009 and 38% said the economy will contract.

More job losses coming

The U.S. economy likely lost jobs again in October -- although the Labor Department won't be able to confirm that until its report Friday.

Economists expect 200,000 job losses in October, which would make it the 10th consecutive month of job losses. A loss of that size would be the worst since March 2003.

The unemployment rate is expected to tick up to 6.3% from 6.1% in September.

The economy lost 159,000 jobs in September, and 760,000 jobs in the first nine months of the year.

"It should be another lousy report," Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, told Bloomberg News. "This'll be another nail in the consumer's coffin."

Some hope from Libor

There was a little bit of good news on the lending front this morning.

The three-month London interbank offered rate, or Libor, fell to 2.86% this morning from 3.03% on Friday. Libor is the interest rate at which large international banks are willing to lend each other money on a short-term basis. Before the credit crunch, Libor rates typically tracked about half a percentage point above the official target of the Federal Reserve. (The Fed's federal funds rate is currently at 1%.) But that gap had widened in recent months, sending borrowing costs surging.

"Interest-rate cuts will help," Jan Misch, a money market trader at Landesbank Baden-Wuerttemberg, in Stuttgart, Germany, told Bloomberg News. "The most important factor is that we haven't had bad news in terms of corporate or bank trouble for a few days. My view is that sentiment in the money market will improve further this week."

The European Central Bank and the Bank of England are both expected to lower interest rates on Thursday.

Upgrades and downgrades

Analyst moves appeared to send some stocks moving this morning.

Discount retailer Wal-Mart Stores (WMT, news, msgs) was upgraded to "overweight" from "neutral" at JPMorgan Chase. The analyst said Wal-Mart's consumer image is turning more favorable. Shares of Wal-Mart shares rose 0.3% to $55.97.

Oil driller Halliburton (HAL, news, msgs) shares tumbled 7.2% to $18.36 after the stock was downgraded to "neutral" from "buy" at Goldman Sachs.

Home builder Pulte Homes (PHM, news, msgs) was downgraded to "hold" from "buy" at Citigroup. Pulte shares slipped 6.2% to $10.55.

Boeing back on track after strike

Boeing (BA, news, msgs) factories started working again on Sunday after an eight-week strike that slashed the company's revenue by $100 million a day.

The Dow component's 27,000 machinists voted to approve a deal to end the strike, which began Sept. 6.

The new contract calls for wage increases totaling 15% and lump-sum payments totaling at least $8,000 for each employee over the next four years.

Boeing shares were up 0.8% to $52.85.

Andrew Rosenbaum contributed to this report.

Short hits from the markets -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	0.420%	0.435%	-0.015	-53.33%	-86.62%
5-year Treasury note yield	2.706%	2.821%	-0.115	-9.38%	-21.68%
10-year Treasury note yield	3.904%	3.970%	-0.066	2.01%	-3.25%
30-year Treasury bond yield	4.321%	4.369%	-0.048	0.37%	-3.09%
Currencies
U.S. Dollar Index	86.985	86.345	0.640	0.74%	13.42%
British pound in dollars	$1.5838	$1.6095	-0.0257	-1.55%	-20.38%
Dollar in British pounds	£0.6314	£0.6213	0.0101	1.58%	25.60%
Euro in dollars	$1.2649	$1.2757	-0.0108	-0.78%	-13.46%
Dollar in euros	€ 0.7906	€ 0.7839	0.0067	0.79%	15.55%
Dollar in yen	99.17	98.25	0.92	0.56%	-11.34%
Canadian dollar in U.S. dollars	$0.846	$0.826	$0.0205	2.29%	-14.77%
U.S. dollar in Canadian dollars	$1.182	$1.211	-$0.0284	-2.21%	17.33%
Commodities
Gold	$726.80	$718.20	$8.60	1.20%	-13.27%
Copper	$1.8400	$1.8290	$0.01	0.60%	-39.49%
Silver	$9.7500	$9.7300	$0.02	0.21%	-34.65%
Corn	$4.0300	$4.0150	$0.02	0.37%	-11.53%
Crude oil (NYMEX) (per barrel)	$63.91	$67.81	-$3.90	-5.75%	-33.41%