- The Washington Times - Thursday, March 5, 2009

UPDATED:

Wall Street tanked Thursday, spurred by an apparent growing lack of confidence in the financial system, weak corporate earnings without a turnaround in sight and concern that debt-wracked General Motors could file for bankruptcy. The Nasdaq fell through the 1,300-point level.

All three of the major indexes tumbled at least 4 percent, the benchmark Standard & Poor’s 500 again dropped below 700 points — its lowest point since September 1996 — and the Dow Jones Industrial Average fell through the 6,600-point mark, its lowest close since April 1997, CNBC said. The bottom was anyone’s guess.

At the close, the Dow plunged 281.40, or 4.09 percent, to 6,594.44. The tech-laden Nasdaq plummeted 54.15, or 4 percent, to 1,299.59, its lowest point since Nov. 21, CNBC said. The S&P 500 sank 30.32, or 4.25 percent, to 682.55.

“There’s too much uncertainty,” Alec Young of Standard & Poor’s told CNBC.

Bank stocks led the way down, with Wells Fargo off more than 16 percent to close at $8.03 a share, JPMorgan Chase down more than 13 percent to close at $16.68, and Bank of America declining by more than 10 percent to close at $3.21.

Shares of Citigroup, valued at about $270 billion about two years ago, at one point during the day sank more than 10 percent to less than $1 for the first time, the bank’s solvency in question because of toxic assets. It ended the day at $1.02 a share.

“The economy continues to deteriorate,” Robert Dye, senior economist with PNC Financial Services Group of Pittsburgh told The Washington Times. “The possibility that GM might have to declare bankruptcy only adds more fuel to the fire. These are truly dark days for the recessionary cycle.”

GM’s accounting firm of Deloitte & Touche LLP raised the prospect of the possible bankruptcy of the giant automaker, until last year the world’s No. 1 vehicle manufacturer, in the firm’s annual report. It said there was “substantial doubt” the debt-ridden firm could continue operations.

GM shares fell 15.45 percent to close at $1.86.

The federal government has lent GM $13.4 billion, and the company is seeking another $30 billion during the worst downturn for the auto industry since the early 1980s, when the country was in recession. The company has amassed $82 billion in losses during the past three years, including $30.9 billion last year.

GM said in its report that the viability plan it submitted to the government last month in order to qualify for the loan must succeed if it is to remain alive.

“If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code,” the firm said.

The markets resumed their slide, now in its fourth consecutive week, despite a rally Wednesday that pushed the Dow up nearly 150 points, in part because of expectations that industrial powerhouse China, the world’s No. 2 consumer of oil, would come through with a stimulus package, thus boosting imports from elsewhere. It was not to be.

China outlined how it plans to stimulate its economy but failed to announce any new incentives beyond the $585 billion that it committed to spend in November to combat the economic crisis.

On the housing front, the Mortgage Bankers Association reported that a record 5.4 million homeowners, about 12 percent, were at least a month behind in their payments or in foreclosure at the close of 2008. It marked an increase of 2 percent from the end of the third quarter and 4 percent from the end of 2007.

Fully 48 percent of those who have subprime or adjustable-rate mortgages are behind in payments or in foreclosure, the association said.

The burst of the housing bubble precipitated the financial crisis and the stock market meltdown that started in September. The Dow is less than half of what it was in October 2007.

“This is an equal opportunity recession,” Mr. Dye, the economist, said. “Almost all industries in the United States — even globally — are being affected. There’s no place to hide.”

“The only thing that can change this are the various policy changes coming from inside the Beltway, but none of them has had the traction to show benefits,” he said.

He predicted “better numbers” for the economy by the end of the year, “but I don’t see forward momentum until the beginning of the [next] year.”

Among retailers, much of the news about February sales was bad for the department stores and some specialty clothiers such as Abercrombie & Fitch. But Wal-Mart reported a 5.1 percent surge in same-store sales, more than double the 2.4 percent expected by analysts polled by Thomson Reuters.

Indeed, Wal-Mart, the world’s largest retailer, announced that it would raise its dividend 15 percent to 27.5 cents a share, CNBC reported.

Wal-Mart attributed much of the reason for the sales gain to falling gas prices because they “significantly boosted household disposable income in February and therefore allowed for both more trips and more spending towards discretionary categories,” said Vice Chairman Eduardo Castro-Wright.

In a surprise, the Labor Department said the number of people who filed for jobless claims for the first time last week dropped to 639,000 from the upwardly revised figure of 670,000 the previous week and that the number of people receiving continuing benefits declined to 5.1 million from 5.12 million.

Analysts polled by Briefing.com had expected the number of first-time filers to hit 650,000 for the week ended Saturday.

But the four-week average of first-time filers moved up to 641,750, still the highest since October 1982, a time of recession.

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