Stocks tumble amid auto bailout worries


POSTED: Friday, December 12, 2008

NEW YORK » Wall Street's anxiety about Detroit automakers welled up yesterday, sending stocks sharply lower in an afternoon sell-off as investors grew fearful that a bill to rescue the companies wouldn't make it through the Senate.

Prospects for the $14 billion in loans to cash-starved General Motors Corp. and Chrysler LLC dimmed yesterday afternoon as opposition from both parties mounted. At the close of trading, the bill was stalled in the Senate, though negotiations were continuing, according to congressional staffers.

Lawmakers opposed to the plan argued that any government support should require significant cuts in wages and benefits for autoworkers. The House approved the plan late Wednesday on a vote of 237-170 to infuse money within days to the two struggling automakers. Ford Motor Co. has said it does not need aid.

The government reported a surprise jump in weekly unemployment claims yesterday, nearly a week after it said the nation's unemployment rose to a 15-year high in November.

Wall Street has been betting Washington would extend a lifeline to the automakers and even recovered early yesterday from a sell-off at the opening bell that followed the unemployment report and a surprise increase in the nation's trade deficit.

The Dow Jones industrial average fell 196.33, or 2.24 percent, to 8,565.09. The decline left the blue chips with a 0.81 percent loss for the week going into Friday's session.

The broader Standard & Poor's 500 index fell 25.65, or 2.85 percent, to 873.59, and the Nasdaq composite index fell 57.60, or 3.68 percent, to 1,507.88.

The Russell 2000 index of smaller companies tumbled 25.19, or 5.3 percent, to 451.21 as investors looked for the safety of larger companies expected to fare better in a weak economy.

Declining issues on the New York Stock Exchange outnumbered advancers by more than 3 to 1, while consolidated trading volume came to a moderate 5.39 billion shares compared with 5.1 billion shares traded Wednesday.

In Treasurys, the yield on the three-month T-bill stood at 0.01 percent, down from 0.02 percent late Wednesday. The modest yield still indicates a high degree of investor unease. The yield on the benchmark 10-year Treasury note, which also moves opposite its price, fell to 2.66 percent from 2.69 percent late Wednesday.

The one-month T-bill's yield was at 0.02 percent, down from 0.04 percent late Wednesday. It was auctioned on Tuesday with a yield of zero percent, a sign that institutional and foreign investors were so eager to preserve principal they were willing to forgo interest.

The dollar was mostly lower against most other major currencies, while gold rose.

Light, sweet crude jumped $4.46 to settle at $47.98 a barrel on the New York Mercantile Exchange.

GM fell 48 cents, or 10.4 percent, to $4.12, while Ford fell 35 cents, or 10.8 percent, to $2.90. Chrysler isn't publicly traded.