U.S. stocks dropped Monday amid uncertainty about the struggling U.S. auto industry and other concerns about the economy.
The losses started at the opening of the U.S. markets and continued to the close, following those across the world earlier in the day.
The Dow Jones Industrial Average closed 254.16 points down, to 7,522.22. The S&P 500-stock Index closed 28.41 points down, to 787.53. The NASDAQ lost 43.40 points, closing at 1,501.80.
President Obama on Monday morning rejected Chrysler and General Motors restructuring plans, which resulted in fears of bankruptcy.
Though Mr. Obama said the companies would receive additional federal aid under strict guidelines and deadlines, stock prices continued to drop.
“A couple of key things happened: the administration’s rejection of the auto industry’s restructuring, Treasure Secretary Geithner’s comment over the weekend that some banks will need substantially more capital and the anticipation of first-quarter numbers, which are not expected to be positive,” said Brian Lipps, a Charles Schwab vice president. “All of that injected some pessimism into the market and laid a foundation for a pullback. We were due for a breather.”
Mr. Obama said he would give GM adequate working capital over the next 60 days. He also said the administration will work closely with the company during that time to produce a better business plan, which will include potentially consolidating unprofitable brands and riding itself of bad debt.
“We cannot, we must not let our auto industry simply vanish,” he said.
On Chrysler, Mr. Obama said he has determined the company cannot survive as a stand-alone company and must reaches a deal by April 30 with Italian automaker Fiat. The company said Monday afternoon it had reached a tentative deal with Fiat. Mr. Obama also said Chrysler would receive “adequate capital” to continue operating until the deadline.
The latest Obama plan began Sunday with the administration forcing the resignation of longtime GM Chief Executive Officer Rick Wagoner and replacing him with Fritz Henderson, the company’s chief operating officer.
The two companies received a combined $17.4 billion in loans from the Treasury Department.
The drop Monday comes despite an overall strong month for U.S. markets. The Dow as of Friday had posted gains for three straight weeks, despite a 148-point sell-off Friday, to close at 7,766.38. It was Wall Street’s strongest three-week rally since 1982.
The Europe and Asia markets fell Monday morning following the sell-off Friday. The FTSE 100 of leading British shares was down 118.26 points, to 3780.59. Earlier in Asia, Japan’s Nikkei 225 stock average dropped 390.89 points, or 4.5 percent, to 8,236.08.
Other analysts said Monday there was investor concern about upcoming monthly employment numbers and the G-20 summit later this week in London. World leaders will discuss the international economic crisis.
The talks in London will open Thursday with leaders of industrialized and developing countries looking to reach a unified plan on improving global markets. However, they have blamed the United States for creating the worldwide economic crisis and have been critical of Mr. Obama’s multibillion-dollar bailout plan. Other countries have created smaller bailout plans and appear reluctant to spend additional money.