NEW YORK – Wall Street pulled back sharply Monday from a three-week rally after the White House rejected turnaround plans from General Motors Corp. and Chrysler.
All the major indexes fell more than 2.5 percent, including the Dow Jones industrial average, which lost more than 225 points.
Fears of an automaker bankruptcy have been looming over investors for months, and the latest developments made the market even more uneasy about the industry. GM is getting 60 days worth of financing to restructure, while Chrysler is getting up to $6 billion and 30 days to complete a deal with Italian automaker Fiat. The Obama administration also replaced GM’s CEO Rick Wagoner with the company’s chief operating officer, Fritz Henderson.
“People knew there was going to be some astringent decisions made about the auto companies,” said Dana Johnson, chief economist at Comerica Inc. “But this was a little bit more aggressive government response than people were expecting.”
President Barack Obama is scheduled to make an official announcement at the White House at 11 a.m. Eastern time.
Investors were also taking money out of the market ahead of economic numbers this week and first-quarter earnings in the weeks ahead, fearing that disappointing data would set the market back. Before Friday, the Dow had surged 21 percent over just 13 days in part because of economic and corporate reports that were starting to look more encouraging. But with the economy still deeply troubled, some analysts say the market may have gotten a bit ahead of itself.
In early morning trading, the Dow fell 226.76, or 2.9 percent, to 7,549.42. The Standard & Poor’s 500 index fell 24.86, or 3.1 percent, to 791.08, while the Nasdaq composite index fell 49.24, or 3.2 percent, to 1,495.96.
No major economic reports are scheduled for Monday, but data on employment, manufacturing, and the service sector are due later this week. Friday’s March employment report is expected to show that U.S. employers shed more than 650,000 for the fourth straight month.
Investors will also be focusing on Thursday’s meeting in London of G-20 leaders of industrialized and developing countries. The group is expected to increase financial regulation, but investors’ hopes for a coordinated fiscal boost are waning. The Financial Times, citing a draft of the meeting’s communique, reported that there are no specific plans for a fiscal stimulus package.
And bank worries continue to dog the market. Over the weekend, Spain was forced to bail out a bank for the first time since the financial crisis began. The Bank of Spain took control of a small savings bank and provided $12 billion in government funds to support it.
Bond prices were mostly higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.70 percent from 2.76 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.13 percent from 0.12 percent.
Crude oil fell $2.12 to $50.26 a barrel on the New York Mercantile Exchange.
The dollar was mostly higher against other major currencies. Gold prices rose.
Overseas, Japan’s Nikkei stock average fell 4.53 percent. In afternoon trading, Britain’s FTSE 100 fell 2.3 percent, Germany’s DAX index fell 3.6 percent, and France’s CAC-40 fell 3.3 percent.
———
ON THE WEB
New York Stock Exchange: www.nyse.com
Nasdaq Stock Market: www.nasdaq.com