Wall Street Woes Continue Amid Auto Bailout Worries

By JOE BEL BRUNO and TIM PARADIS
|  Friday, Dec 12, 2008  |  Updated 5:56 PM PDT
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Bush, Obama Work for Auto Bailout

AP

While investors waited for news on the automakers, they placed bets on energy companies and dropped financial stocks.

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Bush, Obama Work for Auto Bailout

President George W. Bush and President-elect Barack Obama both agree something needs to be done to save the Big Three.
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Wall Street's anxiety about Detroit automakers welled up Thursday, 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.

The pullback follows mostly moderate moves in stocks since mid-November and is a fresh reminder of investors' fears about the economy.

Prospects for the $14 billion in loans to cash-starved General Motors Corp. and Chrysler LLC dimmed Thursday afternoon as opposition from both parties mounted.

Lawmakers opposed to the plan are arguing that any support for the nation's auto industry should carry significant concessions from autoworkers and creditors and reject tougher environmental rules imposed by House Democrats. 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 heads of the three automakers said that even one of the companies going into bankruptcy would slam an already battered economy with thousands of job losses.

Wall Street has been betting Washington would extend a lifeline to the automakers and even recovered early Thursday from a sell-off at the opening bell that followed weak readings on unemployment and the trade deficit. But the worries about the carmakers weighed on a market that managed to trade flat for much of the session.

"What we had was a little bit of a jumping of the gun, overreaction to the auto rescue bill," said Jon Nadler, senior analyst at Kitco Bullion Dealers Montreal. "The Dow tried to put a good face on things, but at the end of the day, reality set in."

According to preliminary calculations, the Dow Jones industrial average fell 196.33, or 2.24 percent, to 8,565.09.

The 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.

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