Dow off 100 in late selling; oil falls to $40

By Charley Blaine and Elizabeth Strott

Stocks faded in late-day trading even as crude oil dropped below $40 for the first time in more than four years.

The Dow Jones industrials, which had been down as much as 146 points, were down 100 points, or 1.1% to 8,824. The Standard & Poor's 500 Index was off 9 points, or 1%, to 904, and the Nasdaq Composite Index slipped 11 points, 0.7%, to 1,579.

Futures trading late today was suggesting the market will open slightly lower on Thursday.

Crude closed at $40.06, down 8.1% on the day as oil traders concluded a production cut from the Organization of Petroleum Exporting Countries would do little to boost prices. Crude has fallen nearly 73% since last summer.

In fact, there was talk crude could fall to $30 a barrel, which would mean lower gasoline prices for consumers. Gasoline averaged $1.667 a gallon today, up slightly from Tuesday, but down 59.5% from its July 17 peak of $4.114 a gallon, according to AAA's Daily Fuel Gauge Report.

• Get free, real-time stock quotes on MSN Money

The OPEC cut was "less than meets the eye," Lawrence Eagles, global head of commodities research at JPMorgan Chase, told Bloomberg News.

The Dow was weighed down by weakness in Citigroup (C, news, msgs), down 4.9% to $7.83 after The Wall Street Journal reported that federal banking regulators have toughened their scrutiny of the banking giant. Regulators are involved in internal discussions about the company's strategic direction and discouraging executives from pursuing a number of acquisitions, The Journal said.

But investors shrugged off a larger-than-expected fourth-quarter loss from Morgan Stanley (MS, news, msgs). The stock closed up 2.3% to $16.50. The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund was down 0.9% to $12.81. The ETF tracks the financial sector of the S&P 500.

The Nasdaq, meanwhile, was weighed down in part by a 6.6% decline in shares of Apple (AAPL, news, msgs) to $89.16. The drop was in response to news that CEO Steve Jobs won't speak at next month's Macworld trade show. That, in turn, generated new concern about Jobs' health. He has had cancer before. Analyst Charles Wolf of Needham & Co. said, however, that he understood Jobs was "cancer-free."

The market was still trying to understand the implications of the Federal Reserve's move Tuesday to cut interest rates and look to buy up mortgage and other securities in a bid to give the recession-bound economy a boost.

The Fed's decision set off a big stock market rally, with the Dow up 360 points.

Interest rates were lower TODAY. The yield on the 10-year Treasury note was down to 2.17% this afternoon from 2.36% on Tuesday.

• Top Stocks Blog:Fed slashes interest rates; nothing happens

But the dollar was dropping rapidly against major currencies. It was off 1.9% against the euro, the biggest daily drop against the euro since it became the chief currency of continental Europe. It also fell 1.2% against the Japanese yen. The greenback has fallen nearly 7% against the yen this week alone.

Only six of the 30 Dow stocks were ahead on the day, led by General Motors' (GM, news, msgs), up 2.8% to $4.37. Meanwhile, 227 S&P 500 stocks showed gaines, along with 51 stocks in the Nasdaq-100 Index, which was off 18 points, or 1.4%, to 1,226. Apple was responsible for about half of the loss.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$40.06	$43.60	-$3.54	-26.41%	-58.26%
Heating oil (per gallon)	$1.4425	$1.4686	-$0.0261	-13.81%	-45.55%
Natural gas (per million BTU)	$5.6190	$5.7510	-$0.1320	-13.69%	-24.91%
Unleaded gasoline (per gallon)	$1.0055	$1.0400	-$0.0345	-12.28%	-59.63%

Chrysler, GM woes take a toll

Chrysler's financing arm has warned dealers it may have to temporarily stop loans that dealers use to pay for stocking vehicles on their lots as a result of a recent wave of withdrawals from a fund used to pay off those loans, The Wall Street Journal reported today.

At the same time, CNBC reported that Chrysler, which had planned to shut its plants for two weeks starting Friday, will shut them for an additional two weeks in January.

The reports offer more evidence of how difficult business is becoming for U.S. automakers. They have been lobbying Congress and the Bush administration for help to survive the current slump.

In a Dec.12 letter, Tom Gilman, Chrysler Financial's ceo, said dealers had been withdrawing up to $60 million a day from the fund, The Journal said. More than $1.5 billion has been withdrawn from the fund since July, the letter said.

Dealers told The Journal that they started pulling money from the "cash management account" because of fears that Chrysler's auto operations could be forced to file for bankruptcy.

Chrysler Financial lets dealers put money into the account and pays them 2% interest. The money is then used to make payments on the loans dealers take out to buy new cars.

Separately, General Motors' uncertain cash outlook has put Flint's $370 million new engine plant for the highly touted Chevrolet Volt and Chevrolet Cruze on hold.

The Volt is an extended-range electric car intended to compete against Toyota Motor's (TM, news, msgs) Prius and other hybrid vehicles.

The news had no effect on GM shares, which was the top-performing Dow stock, with a 2.8% gain to $4.37 as talks continue to get federal help to GM and Chrysler.

"Given the situation that GM is in right now, all expenditures, anything that involves capital, is under review," GM spokeswoman Sharon Basel told the Flint Journal in Michigan. "And such as the case with the Flint engine plant."

It was only three months ago that GM CEO Rick Wagoner came to Flint to announce that the auto giant planned to build a 552,000-square-foot plant to make the engine.

Weak US sales hurt Nike shares

Athletic shoe-and-apparel maker Nike (NKE, news, msgs) quarterly net profit rose 9% on higher-priced products and international growth, but revenue fell in the United States, its largest segment, and at the non-Nike brands group.
Shares slipped 2.8% after hours to $49.21. They'd risen 2% to $50.64 in regular trading.

Nike said second-quarter net income rose to $391.0 million, or 80 cents per share, from $359.4 million, or 71 cents per share, a year earlier.
Sales rose 6%, with gains in all regions except the United States, where revenue fell 1%. Revenue rose 6% in Europe and 22% in the Asia Pacific region.
Revenue in the company's non-Nike brands group, which includes Cole Haan, Hurley and Converse, fell 4%.

Morgan Stanley loses $2.3 billion

Morgan Stanley's $2.3 billion loss came to $2.24 per share -- worse than the consensus estimate of a loss of 34 cents per share. The financial services company cited "unprecedented market turmoil" for the loss.

Morgan Stanley lost $3.61 billion, or $3.61 per share, in the same quarter a year ago.

Despite the loss the stock moved higher in part because analysts are starting to think the worst of its losses are known. Ladenburg Thalmann's Dick Bove boosted his earnings estimates for the company and raised target price from $15 to $18.

"The company’s earnings will improve due primarily to the elimination of losses," he wrote clients today. "It will take much longer to get the core businesses to provide additional earnings."

On Tuesday, Goldman Sachs (GS, news, msgs) posted its first quarterly loss since going public in 1999. Goldman was up 3.7% to $78.78 today.

Banks and brokerages around the world have disclosed more than $740 billion of write-downs and credit losses since the subprime mortgage market collapsed last year, according to data compiled by Bloomberg.

OPEC to cut output by record

OPEC's cut initially confused investors because the headline number was a record 4.2 million barrels a day.

That turned out to 4.2 million barrels per day from September levels -- or 2.2 million barrels per day from current levels. OPEC had initially suggested a cut of 2 million barrels per day from current levels.

The cut didn't impress many. "This may stem the bloating in stocks but isn’t enough to get rid of the surplus," JPMorgan' Eagles said.

• Top Stocks blog: Is the OPEC cut a good thing?

Crude, which was jumping on the headline number, promptly reversed course. A contributing factor: Crude supplies rose by 500,000 barrels last week, according to the Energy Information Administration's weekly supply report. Gasoline supplies rose by 1.3 million barrels, and distillate stocks were up 2.9 million barrels last week.

Inventories have gained because the oil market is in contango, where crude for future delivery is more expensive than near-month prices, encouraging stockpile increases.

Supplies at Cushing, Okla., where oil that’s traded in New York is stored, climbed 21% to 27.5 million barrels, the highest since May 2007.

Oil has plunged 70% since closing at a record high of $145.08 a barrel in July.

OPEC, which supplies more than 40% of the world's oil, announced smaller production cuts in September and October, but those moves failed to put the brakes on oil's slide. OPEC currently produces 27.3 million barrels of oil per day.

Schapiro seen chairing SEC in wake of Madoff mess

President-elect Barack Obama is expected to nominate Mary Schapiro as chairman of the Securities and Exchange Commission.

Schapiro, now chief of the Financial Industry Regulatory Authority, Wall Street's self-regulator, was an SEC commissioner from 1988 to 1993 and chaired the Commodities Futures Trading Commission in 1994.

Schapiro has her work cut out for her. She would succeed Christopher Cox, who has admitted that the agency made mistakes in failing to discover the Ponzi scheme allegedly run by New York money manager Bernie Madoff.

Federal prosecutors have charged Madoff with securities fraud. The charges state that Madoff's firm was a Ponzi scheme, claiming fictitious gains on investments and paying off established investors with funds taken from new investors.

• Learn how to invest with our New Investor Center

Cox said he has ordered an internal investigation to determine why the SEC failed to fully investigate previous allegations about Madoff.

One issue that the SEC will likely look into is the relationship between Madoff's niece Shana and her husband, former SEC official Eric Swanson. Swanson worked at the SEC for 10 years. Shana Madoff was a compliance lawyer at Madoff's securities firm, The Wall Street Journal reported.

Motorola to cut benefits

Motorola (MOT, news, msgs) this morning said it will permanently freeze its pension plan and will temporarily suspend its matching contributions to employees' 401(k) plans. Co-Chief Executives Greg Brown and Sanjay Jha also said they will voluntarily take a 25% cut to their 2009 base salaries. Most Motorola employees will not be seeing any salary increases in 2009.

"The sustained downturn in the global economy requires that we take these difficult but necessary steps," Motorola executives said in a joint statement. The company expects the measures to help cut costs.

Motorola announced plans to cut $800 million in costs two months ago.

Motorola shares finished unchanged at $4.41. Motorola has been hammered by the increased competition in the handset market, with its stock value falling more than 70% over the past year.

GE sticks to 2008 forecast

General Electric (GE, news, msgs) late Tuesday said it still expects to earn between $1.78 and $1.84 per share for 2008, but did not give any guidance for 2009.

In fact, GE said it will no longer give quarterly earnings forecasts and will instead provide full-year operating "frameworks."

"We've come through this having learned a lot, having come through challenging times," GE Chief Executive Officer Jeff Immelt said at the company's annual analyst meeting Tuesday afternoon.

GE said it will keep its dividend at $1.24 per share and that it will no longer look to sell or spin off the division that makes light bulbs.

Shares of GE, a Dow component, fell 3% to $17.39.

Andrew Rosenbaum contributed to this report.

Short hits from the markets -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	0.005%	0.025%	-0.020	-75.00%	-99.84%
5-year Treasury note yield	1.352%	1.347%	0.005	-30.45%	-60.87%
10-year Treasury note yield	2.190%	2.363%	-0.173	-25.94%	-45.72%
30-year Treasury bond yield	2.665%	2.874%	-0.209	-23.57%	-40.23%
Currencies
U.S. Dollar Index	80.075	81.595	-1.520	-7.65%	4.41%
British pound in dollars	$1.5473	$1.5588	-0.0116	0.57%	-22.22%
Dollar in British pounds	£0.6463	£0.6415	0.0048	-0.57%	28.57%
Euro in dollars	$1.4327	$1.4055	0.0272	12.87%	-1.98%
Dollar in euros	€ 0.6980	€ 0.7115	-0.0135	-11.40%	2.02%
Dollar in yen	87.86	88.92	-1.06	-8.09%	-21.45%
Canadian dollar in U.S. dollars	$0.831	$0.829	$0.0021	2.91%	-16.26%
U.S. dollar in Canadian dollars	$1.204	$1.206	-$0.0023	-2.83%	19.42%
Commodities
Gold	$868.50	$842.70	$25.80	6.04%	3.64%
Copper	$1.3725	$1.3785	-$0.01	-16.79%	-54.87%
Silver	$11.4200	$10.7050	$0.72	11.63%	-23.46%
Corn	$3.8950	$3.9400	-$0.04	11.44%	-14.49%
Crude oil (NYMEX) (per barrel)	$40.06	$43.60	-$3.54	-26.41%	-58.26%