Spring Break
Stocks drop on worries about economy, automakers
Associated Press
Issue date: 2/17/09 Section: News
NEW YORK (AP) - Stocks tumbled Tuesday as investors grew more doubtful that the government can quickly turn around the still-weakening economy.
The major indexes dropped by well over 3 percent, and the Dow Jones industrial average sank near the multi-year lows it reached last November.
A big worry on Wall Street is that General Motors Corp. and Chrysler LLC might not be able to prove by Tuesday's deadline that they can repay billions of dollars in loans and return to profitability. GM has already received $9.4 billion from the government, and could get another $4 billion if the Treasury Department signs off on its viability plan. Chrysler has borrowed $4 billion, and is seeking another $3 billion.
Sam Stovall, chief investment strategist at Standard & Poor's, said Wall Street is nervous GM will say it cannot survive without additional funds - an admission that would then lead investors to ask, "What if GM does go under?"
GM shares sank 31 cents, or 12.4 percent, to $2.19.
The failure of a company with the name recognition of GM would "impact the psyche of the average consumer," Stovall said.
Consumers have already been sharply reining in their spending - a pullback that has been affecting companies across nearly all industries. On Tuesday, the New York Federal Reserve said its index of regional manufacturing activity is contracting much more severely this month than the market anticipated.
President Barack Obama is set to sign the $787 billion stimulus package into law Tuesday in Denver. On Wednesday, he will be outlining a plan to help stem mortgage foreclosures. Wall Street had eagerly awaited the government's plans to help the economy. But now that the programs have become reality, investors are realizing that even if the programs work, the effects will not be immediate.
"The concern that's really emerging now is if it's going to be a large enough program to jolt the economy back into expansion," said Thomas J. Lee, equities analyst at JPMorgan. "We don't think the recession's over until at least the middle of the year, and that's starting to seem very early.
The major indexes dropped by well over 3 percent, and the Dow Jones industrial average sank near the multi-year lows it reached last November.
A big worry on Wall Street is that General Motors Corp. and Chrysler LLC might not be able to prove by Tuesday's deadline that they can repay billions of dollars in loans and return to profitability. GM has already received $9.4 billion from the government, and could get another $4 billion if the Treasury Department signs off on its viability plan. Chrysler has borrowed $4 billion, and is seeking another $3 billion.
Sam Stovall, chief investment strategist at Standard & Poor's, said Wall Street is nervous GM will say it cannot survive without additional funds - an admission that would then lead investors to ask, "What if GM does go under?"
GM shares sank 31 cents, or 12.4 percent, to $2.19.
The failure of a company with the name recognition of GM would "impact the psyche of the average consumer," Stovall said.
Consumers have already been sharply reining in their spending - a pullback that has been affecting companies across nearly all industries. On Tuesday, the New York Federal Reserve said its index of regional manufacturing activity is contracting much more severely this month than the market anticipated.
President Barack Obama is set to sign the $787 billion stimulus package into law Tuesday in Denver. On Wednesday, he will be outlining a plan to help stem mortgage foreclosures. Wall Street had eagerly awaited the government's plans to help the economy. But now that the programs have become reality, investors are realizing that even if the programs work, the effects will not be immediate.
"The concern that's really emerging now is if it's going to be a large enough program to jolt the economy back into expansion," said Thomas J. Lee, equities analyst at JPMorgan. "We don't think the recession's over until at least the middle of the year, and that's starting to seem very early.
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