NEW YORK (RushpRnews)12/12/08-Wall Street stocks hit the skids on Thursday as prospects dimmed for passage of a $14-billion rescue plan for the troubled US auto industry after a key senator opposed the measure.
The Dow Jones Industrial Average dropped 196.33 points (2.24 percent) to close at 8565.09.
The Nasdaq composite shed 57.60 points (3.68 percent) to 1507.88 and the Standard & Poor’s 500 sank 25.65 points (2.85 percent) to 873.59.
The market opened weaker after disappointing economic news, then pared losses briefly before sinking further as news of the auto rescue bill made its way to Wall Street.
Republicans kill bailout bill
“According to several sources, the Republican members of the Senate have effectively killed the Detroit bailout bill,” said Douglas McIntyre of the financial website 24/7 Wall Street.
Senate Republican leader Mitch McConnell announced his opposition to the plan, breaking with President George W. Bush.
Observers said McConnell was seen as a key to helping overcome opposition from other Republican lawmakers.
The White House said failure to pass the measure could lead to bankruptcy for one or more of the Big Three automakers and deeper economic troubles.
White House spokesperson Dana Perino said: “We believe that the economy is in such a weakened state right now that … another possible loss of one million jobs is just something our economy cannot sustain.”
The market also reacted to news that jobless claims in the past week surged to a fresh 26-year high of 573 000, well above expectations.
This is awful
“This is awful,” said Ian Shepherdson at High Frequency Economics.
“It is very clear that the underlying trend in claims is still rocketing, as companies throw in the towel and prepare for a long, deep recession.”
Also disappointing was news that the trade deficit widened 1.1 percent in October to $57.2-billion.
“The trade deficit will make the recession longer and deeper, and lessen the positive benefits of president-elect (Barack) Obama’s proposed stimulus package,” said Peter Morici, economist at the University of Maryland.
Among stocks in focus, General Motors slumped 10.43 percent to 4.12 dollars and Ford slid 10.77 percent to 2.90 dollars as the auto giants awaited news on the bailout plan.
Boeing fell 3.384 percent to 40.27 dollars as it formally announced a delay for the launch and delivery of its 787 Dreamliner jets.
JPMorgan Chase slumped 10.68 percent to 29.94, dragging the rest of the financial sector lower, after its Chief Executive Jamie Dimon told CNBC television that November was a “terrible” month for the company and December has been bad as well.
Procter & Gamble fell 0.91 percent to 58.58 dollars as the consumer goods maker marked down its outlook due to a weak global economy.
The bond market remained in focus, with the four-week Treasury bill showing a negative yield of minus 0.04 percent in a sign of extraordinary demand for short-term US government securities.
The yield on the 10-year Treasury bond fell to 2.648 percent from 2.684 percent on Wednesday and that on the 30-year bond eased to 3.089 percent against 3.095 percent. Bond yields and prices move in opposite directions.