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Stocks plunge another 445 over uncertainty about Detroit

Stocks plunged for a second straight day Thursday, falling to levels not seen in at least five years as financial and energy stocks tumbled while demand for the safety of government debt spiked.

Stocks saw the most intense selling late in the session after hopes faded that lawmakers would quickly assemble an aid package for U.S. automakers and as the Standard & Poor's 500 index broke through lows established in 2002. That breach of a key technical threshold sent a shudder through the market and touched off further selling.

The Standard & Poor's 500 index fell 6.7 percent to its lowest close since April 1997. The Dow Jones industrial average, meanwhile, fell 445 points, or 5.6 percent, to its lowest close since March 2003. The decline brings the Dow's two-day drop to 873 points, or 10.6 percent, its worst two-day percentage loss since October 1987.

Financial stocks plunged on worries that the government's financial rescue won't be sufficient to cover banks' losses. Meanwhile, a sharp drop in oil prices weighed heavily on energy companies.

"Unrelenting gloom has taken over the markets," said Dana Johnson, chief economist at Comerica Inc. "The economic news, the concerns about some major financial institutions, the concerns about the auto sector, earnings reports, everything is coming out in a way that is just provoking a massive selling in the stock market."

"Back in October we were looking at a potential catastrophic meltdown of the credit markets, and that didn't happen," he said. "But that doesn't mean tremendous damage hasn't been done to the economy."

Those worries about the economy sent the Dow down 444.99, or 5.56 percent, to 7,552.29. It was the biggest percentage drop for the blue chips since Oct. 22 and the Dow's lowest close since March 12, 2003.

Broader stock indicators also showed huge declines. The Standard & Poor's 500 index fell 54.14, or 6.71 percent, to 752.44, below the closing low of 776.76 logged on Oct. 9, 2002 to its lowest close since April 14, 1997.

The Nasdaq composite index fell 70.30, or 5.07 percent, to 1,316.12.

The Russell 2000 index of smaller companies fell 27.07, or 6.56 percent, to 385.31.

Jon Biele, head of capital markets at Cowen & Co., said investors are bracing for more bad news.

"The view on the floor is nobody is sure what the next stop is," he said. "I think the market is expecting another shoe to drop."

"Some people think this is the capitulation we've been waiting for," he said. "All along we've been hoping for a real violent sell-off and the end of the day today was a pretty dramatic move."

The yield on the benchmark 10-year Treasury note sank to 3.00 percent, its lowest level since June 2003. The 30-year bond's yield fell to 3.46 percent — the lowest since the government started issuing the bond in 1977. The yield on the 2-year note, meanwhile, fell to 0.97 percent — the lowest since 1947, according to Global Financial Data in Los Angeles.

Stocks rose briefly during the session on hopes that Washington would agree to help Detroit's Big Three. But Democratic leaders in Congress delayed a vote on bailing out the auto industry until December and are asking General Motors, Ford and Chrsyler to present a plan to show how the $25 billion cash injection they have sought would be used.

Investors who have been groping for a bottom to the yearlong market rout have been worried that Washington's disagreements over whether to bail out the auto industry could lead to bankruptcies that would cascade into other industries and throw perhaps millions of workers out of work.

Automakers advanced on hopes that a deal might eventually be reached. General Motors Corp. rose 9 cents, or 3.2 percent, to $2.88, while Ford Motor Co. rose 13 cents, or 10.3 percent, to $1.39. Chrysler LLC isn't publicly traded.

Analysts said the worries about the automakers are only one of many concerns for the market and the uncertainty about the overall economy was battering stocks.
Meanwhile, energy stocks fell sharply as oil tumbled. $4 to settle at $49.62 on the New York Mercantile Exchange. Chesapeake Energy Corp. fell $5.32, or 28 percent, to $13.98, while Marathon Oil Corp. fell $4.53, or 19 percent, to $19.58.

Gus Scacco, managing director at AG Asset Management, said investors can't manage to regain confidence as the market continues to plumb new depths.

"We're trying to make a bottom but we keep breaking through," he said.

The dollar rose against most major currencies but fell against the yen, while gold rose.

Overseas, Japan's Nikkei stock average fell 6.9 percent, while Hong Kong's Hang Seng Index slid 4.04 percent. Britain's FTSE 100 fell 3.26 percent, Germany's DAX index fell 3.08 percent, and France's CAC-40 fell 3.48 percent.

Copyright The Associated Press
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