Stocks finish lower as recession worries deepen

NEW YORK — Wall Street finished sharply lower Monday as investors pored over more signs of economic weakness, including a huge round of layoffs in the financial sector.

After a turbulent week that sent the Dow Jones industrials down nearly 340 points, investors found little solace in the latest news. Stocks zigzagged throughout the session, finally giving way to a stream of late-day selling that left the Dow Jones industrials lower by 223 points.

In a signal that banks are still struggling in the wake of massive losses tied to bad mortgage debt, Citigroup Inc. is cutting another 53,000 jobs in the coming quarters. The company said that in addition to job cuts, it plans to lower expenses by about 20 percent and has reduced its assets by more than 20 percent since the first quarter of the year.

Investors were also nervously waiting to see if the nation's troubled automakers would get a bailout. Senate Democrats, who plan to introduce legislation Monday, want to use part of the $700 billion Wall Street bailout to help prop up Detroit's Big Three carmakers: General Motors Corp., Ford Motor Co. and Chrysler LLC. A vote was expected as early as Wednesday.

Meanwhile, a better-than-expected reading on industrial production did little to boost investor sentiment. The Federal Reserve said Monday that industrial output rose 1.3 percent last month, after plunging in September by the largest amount in over 60 years. Economists, on average, had expected an increase of 0.2 percent, according to a survey by Thomson/IFR.

Still, the improvement wasn't encouraging enough, said Anthony Conroy, managing director and head trader for BNY ConvergEx Group, adding that investors want a more concrete sign that the economy could be improving.

"I think we're seeing a tremendous amount of bad economic data," he said. "Earnings have basically hit a wall and don't seem like they are coming back anytime soon."

The Dow fell 223.73, or 2.63 percent, to 8,273.58, near its lows of the session.

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Standard & Poor's 500 index fell 22.54, or 2.58 percent, to 850.75, while the Nasdaq composite index dropped 34.80, or 2.29 percent, to 1,482.05.

The Russell 2000 index of smaller companies fell 5.16, or 1.13 percent, to 451.36.

Declining issues outpaced advancers by a 2 to 1 margin on the New York Stock Exchange, where consolidated volume came to a light 5.7 billion shares.

The moves on Monday followed a massive sell-off last week that saw the Dow finish down 5 percent; the S&P 500 index down 6.2 percent; and the Nasdaq down 7.9 percent. The major indexes have fallen for four of the past five sessions.

Analysts believe the market is still searching for a bottom after last month's huge losses, and that the pattern of volatility will continue for some time. Woody Dorsey, president of financial forecasting firm Market Semiotics, said the market is trapped in a seesaw pattern.

"It is a very technical trade," he said. "The difficulty is there is no dominant positive or negative story that the market is operating on. ... There's nothing here that people can grab on to."

In the meantime, investors are still facing a barrage of bad economic news.

Wall Street was also disappointed by a lack of direction taken to resolve the global financial crisis at the meeting of Group of 20 international leaders in Washington this weekend. However, the leaders did pledge to keep working together to provide loans to financial institutions.

In corporate news, Target Corp. on Monday became the latest retailer to post dour results, citing lower sales at established stores as the reason for a 24 percent drop in profit. Lowe's Cos., meanwhile, said its third-quarter profit also fell 24 percent, better than expected, but it predicted a fourth-quarter profit below the average analyst forecast.

The reports follow a spate of disappointing earnings and forecasts from companies like Macy's Inc., Starbucks Corp. and Best Buy Co. as they battle a severe pullback in consumer spending. Investors fear that Americans' clampdown on spending _ which accounts for about two-thirds of economic activity in the U.S. _ will prolong a worsening economic slump.

On Monday, the Bush White House stressed that it steadfastly opposes drawing funds from the bailout plan to help the nation's automakers. The administration supports the idea of helping the struggling companies, but said the $25 billion that Democrats favor taking from the rescue plan should come, instead, from a Department of Energy program previously approved to develop fuel-efficient vehicles.

General Motors shares added 17 cents, or 5.7 percent, to $3.18. Ford slipped 8 cents to $1.72.

Meanwhile, the layoffs planned at Citigroup underscored the ongoing distress in the financial sector. The company said total headcount is being reduced by 20 percent from its peak of 375,000 at the end of 2007; the company had already announced in October that it was eliminating about 22,000 jobs from those levels. The New York-based bank has posted four straight quarterly losses, including a loss of $2.8 billion during the third quarter.

The fallout from this year's global credit crisis has claimed jobs on all corners of Wall Street, from hedge fund managers to floor traders and beyond. Some industry experts forecast the job losses could come close to 200,000 before the year is over.

On Sunday, Goldman Sachs Group Inc. said seven top executives, including Chief Executive Lloyd Blankfein, opted out of receiving cash or stock bonuses for 2008 amid the ongoing credit crisis.

Citi's leaders may also go without bonuses this year _ a move that would effectively amount to a substantial pay cut for the company's executives.

Citigroup shares fell 63 cents, or 6.6 percent, to $8.89. Goldman sank $4.24, or 6.4 percent, to $62.49.

Government bond prices were higher as investors looked for safety. The three-month Treasury bill's yield fell to 0.10 percent from 0.14 percent late Friday, and the yield on the benchmark 10-year Treasury note fell to 3.66 percent from 3.72 percent late Friday. Lower yields indicate higher demand.

The dollar fell against most other major currencies, and gold prices also declined.

Light, sweet crude closed at a 22-month low, falling $2.11 to settle at $55.49 a barrel on the New York Mercantile Exchange.

In Asian trading, Japan's Nikkei index rose 0.71 percent, despite a report showing the second-straight quarterly decline in gross domestic product _ signaling a recession. Hong Kong's Hang Seng Index fell 0.10 percent.

In European trading, Britain's FTSE 100 fell 2.38 percent, Germany's DAX index fell 3.25 percent, and France's CAC-40 fell 3.32 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Comments

[MetalCanuck]

WHat we are going to get is a whole lot worst than a recession.

[JoeBlough]

Let's move to Iraq! They have more money than we do.

[Weathermaker]

The reason why this bailout/loan won't work is simple: overproduction capacity. The US auto industry has a production capacity of 17 million autos a year. Yet, only 10 million were sold this year and in a recession these numbers will go down, not up. I hate to say this, but even if retooling is done, GM, Ford and Chrysler will have to slash their workforce by at least 50%. Which is about 1-2 million jobs across the board, including suppliers and dealers.

[LCRover001]

Odd how everyone is calling for the auto industry to fire its heads yet the banking industry got to keep theirs.

Odd how GWB was so eager to help ou the banks but isn't that interested in helping the big 3.

Not only do the big three provide jobs in their factories there are factories all over this nation that provide products for them if these companies fall so will countless others.

But hey those are middle class jobs and middle class workers so what, our government was falling all over them selves to save white collar jobs and now that the blue collar folks need rescuing well fend for your self you got your selves in to this mess if you drown so what.

So what if it results in hundreds of thousands if not millions of people lose jobs. You guys aren't rich enough for GWB to care about maybe if we were all bankers they would care.

[kstuff]

Clarification:

The Big Three are asking for a loan, to be paid off, with interest not a bailout.

The loan will come from the 700B already allocated to saving the economy.

The Big Three have already laid off some 250,000 people in Michigan alone, with10 to 20% more coming.

Ford, for example, is no longer giving any raises (which is appropriate) and is no longer contributing to any employees 401k (white collar employees, at least), so they're down to the bare bones.

And Goldman Sachs gets praise putting off their bonuses for a year. Yeah, they're really hurting.

Again, the Rich get rescued the working class, middle class and upper middle class "get what they deserve" with no bailout. Amazing. No, frightening.

[Colleen08]

What people are failing to understand is sooo many people are affected by the auto industry, I live and work in the Detroit area, this area will be a sucked down a vaccumm like you wouldn't believe if the big 3 are allowed to fail... restaurants, gas stations, stores, advertising etc, etc, all depend on the big 3 or suppliers for OUR business..while I agree they are greedy, profit driven companies, I don't think I am to blame for that, or my neighbor the electrician, or any one else in my area whose very livelihood depends on these companies.

You should all think about that before making up your minds about what to do.. give them the bridge loans with conditions and make the conditions and terms transperant whatever, but for God's sake do something.

[Pacojam]

I understand what you are saying. However, if if prop-up an unviable industry, the same thing will happen a few months later, and the tax payers will be out the 250 billion that could have been used elsewhere to create sustainable jobs that would truly benefit this country.

We all want the same thing -- sustainable jobs, healthy economy, etc. The question is: how do you get there from here?

[whatsgoingon]

I hate to say it but it looks like the people have been played again. they tried to put the people against each other in the election and now they want to separate the people over wall st meneuverings. Mean time the people suffer. Its getting like: What about my 401k, who cares about your 401k. what about my mtge, who cares about your mtge. How will I eat, who cares if you eat. Now that gas is cheaper I can't buy it cause I'm broke, who cares if your broke. People remember: We have seen the enemy and he is us!

[iPolitics]

1. fire ALL of the auto industries management

2. they must meet ALL green initiatives

then i'd CONSIDER it

[iambusto]

GM has 8 brands. close all but 2 brands

fire all upper management

lay off AT LEAST 35%-40% of employees

Close at least 50% of the plants.

renegotiate all UAW contracts.

then we american taxpayers will consider

[Hawka]

That kind of restructuring might not wait once they burn through all their cash reserves and if their stock keeps dropping like this though...

[PhilipTaylor]

Obama wants the US Auto Industry as a major part of a Green Energy Future. Green Manufacturing is important for many reasons:

1. Diversity
2. Finance is an important function of business but 40% of our Markets is far out of Kilter
3. Green Manufacturing will remove Oil as a stimulus of WAR
4. Manufacturing is required for our Defense
5. Exports are the basis of Wealth Building

[NYZA]

No Bailout. Suffer the reality as most of us would , its called CONSEQUENCES

The consequences when you dont make a good product, when you piss poor manage a company to the ground, when you think the american public is stupid enough to fall for (1) model rebadged as 5 other models, when you cant even compete with your peers because quality and performance is just a marketing term for you, when big vps and execs are taking their luxury private jets to play golf while the company is showing negative PROFITS !!

Do you need more?

Dont believe the hype that they spill, of course jobs will be lost and of course this is a dramatic event but thats LIFE. And experiences have always taught us that when you go down, you will always find a way to get back up

The govt would be foolish to think that pouring more money into this inferno will put out the flames. It wont, it never has , it never will.

[richardgordon]

I guess the difference between you and me and Mr. Obama is pragmatism. I heartily agree with your sentiments, in fact, I can hardly think of a less worthy bunch of people than the Auto Companies. My first thought was, "Let them damn well stew in their own greed, indifference and incompetence. They are the symbol of George Bush writ large". However, after considering Mr. Obama's well thought out pragmatism I have to reluctantly agree that to do so would be the equivalent of hammering the stake into America's heartland.

To paraphrase Clin't Eastwood's famous line in the movie, Unforgiven, "Deserves got nothing to do with it."

Mr. Obama recognizes this and you can't risk putting 3 million people out of business during the worst financial crisis since the Great Depression. Doing so virtually guarantees a second Great Depression vs a bad recession.

What is encouraging is that Obama is not driven by ideology and dogma or emotion. He makes his decisions based on rational reasoning. If anything is going to get the United States out of this mess it is this type of critical thinking. All I can say is thank god McCain did not get in. We would all be living a nightmare now.

[MetalCanuck]

Bailing out these guys would be worst. If they go bankrupt other will buy at firesale prices and keep it going. All this stuff about 3 million losing their jobs is to scare you in to handing them cash for fuel efficient cars they will NOT make and 35MPG is NOT good enough.

[MetalCanuck]

Second Obama is driven by the same things the repubs are driven by. The Dems are in on this crap and they need to pay too.

[bellrich]

The way I see it the US Government is in a box: Do they give the Big Three Automakers another 25 billion dollars keeping the poor management that put them where they are today? Do they just let them fail and put three Million people out of work surely putting this country and maybe the world into a depression? What would other countries do? They would take control of the Automakers and put better Management in to run them, but oops that would be Socialism and we can"t have that it is against our religion.

[KillTheMessenger]

GM only employs 266,000 people, Chrysler 130,000 and Ford a mere 87,000. None of them would close shop completely in case of failure but they would reorganize their business units and keep the ones that are viable while selling the ones that aren't. Honda and Toyota would surely pick up a piece or two of the pie. With the big three smaller, people will still need the same number of cars, they will just buy them elsewhere.

The only thing that happens in case of failure is that the stockholders and creditors get wiped out. And that's OK.

[uncleentropy]

True in every respect....but layoffs at the big three have a multiplier effect on employers in the supply chain. How much....nobody knows. 2x? 3x? 6x? If it is the latter, then 200,000 reduction in employment at the auto companies would mean 1.2 million jobs lost elsewhere.

I can't defend these companies....but I am open to the idea of a bridge loan if for no other reason than it will be cheaper for the govt to gamble on a recovery than to incur the costs of direct and related unemployment.

It all stinks....

[krocklin]

What is the difference between these "bailouts" and the "privatizing" of so many government services?
It's all part of the same discredited Free Market Religion that says pour taxdollars into the Private Sector.
It is not Socialism at all because the entities benefitting from State largess are still not overseen and regulated - far less owned - by The Government.
Bush's last minute plays for Bailouts are just the crowning blows in his strategy to strangle what is left of the Government in the proverbial Norquist bathtub.