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US stocks tumble as automaker plans are rejected

(Agencies)
Updated: 2009-03-31 08:19

Trader Patrick Campbell works in the S&P 500 pit at the Chicago Mercantile Exchange Group March 30, 2009. [Agencies]

Underscoring the fear that the financial industry's troubles are far from over, Treasury Secretary Timothy Geithner said Sunday banks would likely need considerably more money. Also over the weekend, Spain was forced to bail out a bank for the first time since the financial crisis began. The Bank of Spain took control of a savings bank and provided US$12 billion in government funds to support it.

Banks were a driving force behind the market's rally in March and analysts now expect those shares to see some of the biggest declines as investors become more conservative ahead of the first-quarter earnings reports in the next few weeks. Bank of America Corp. fell 17.8 percent Monday and Citigroup fell 11.8 percent.

Related readings:  Obama rejects GM, Chrysler restructuring plans  White House questions viability of GM, Chrysler  GM CEO Wagoner to step down at White House request  GM wields the axe on salaried employees

A bear market began in October 2007 after the Dow and S&P hit record highs. After the indexes hit bottom this past March 9 and then rose shaply, market watchers began debating whether the bear market ended that day. The pessimists believe the rise has been a "bear market rally" and the bear remains intact.

With the economy still deeply troubled, some analysts say Wall Street may have gotten ahead of itself.

"I think we had a huge run up ... that was not really justified," said Peter Jankovskis, co-chief investment officer at OakBrook investments. "There are a lot of negatives right now on the horizon."

Bank stocks had rallied on the hope that their first-quarter performance would be better than expected. But Friday, the heads of JPMorgan Chase & Co. and Bank of America Corp. diminished some of those hopes when they said March has not been as good for business as the first two months of the year.

"It's just prudent to take profits nowadays," said Ron Weiner, president and chief executive of Westport, Conn.-based investment advisory firm RDM Financial, who recently took half of his money out of a financial-based exchange-traded fund. "You have to mix up cash with alternatives that act opposite from the market."

Bank of America dropped US$1.31, or 17.9 percent, to US$6.03. Citigroup Inc. shed 31 cents, or 11.8 percent, to US$2.31.

GM plunged 92 cents, or 25.4 percent, to US$2.70. Chrysler is not publicly traded.

Investors are also awaiting Thursday's meeting in London of G-20 leaders of industrialized and developing countries. The group is expected to increase financial regulation, but investors' hopes for a coordinated fiscal boost are waning. The Financial Times, citing a draft of the meeting's communique, reported there are no specific plans for a fiscal stimulus package.

In other market moves, the Russell 2000 index of smaller companies dropped 13.03, or 3 percent, to 415.97.

About seven stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.8 billion shares, up from 5.48 billion on Friday.

Bond prices mostly rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.72 percent from 2.76 percent late Friday. The yield on the three-month T-bill was at 0.18 percent, up from 0.12 percent Friday.

Crude oil tumbled US$3.97, or 7.6 percent, to settle at US$47.99 a barrel on the New York Mercantile Exchange.

The dollar was higher against other major currencies. Gold prices slipped.

Overseas, Britain's FTSE 100 fell 3.1 percent, Germany's DAX index fell 5 percent, and France's CAC-40 fell 4.3 percent. Japan's Nikkei stock average fell 4.53 percent.

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