Stocks fall on automakers’ debt downgrade
Jittery investors sold stocks lower Thursday as the downgrade of bonds issued by General Motors Corp. and Ford Motor Co. undermined the market’s confidence and erased its earlier modest gains.
“The market shouldn’t be dropping this much just because of two companies in one sector. Everyone knew Ford and GM were hurting, no matter what Kerkorian did yesterday,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “It shows the skittishness of this market. Any feelings of bullishness we may have had are very tentative still.”
The Dow Jones industrial average fell 44.26, or 0.43 percent, to 10,340.38, ending a four-day winning streak. Much of the loss could be attributed to GM’s falling stock price.
Broader stock indicators were narrowly lower. The Standard & Poor’s 500 index was down 3.02, or 0.26 percent, at 1,172.63, and the Nasdaq composite index lost 0.43, or 0.02 percent, to 1,961.80.
Crude oil futures moved sharply higher in afternoon trading after an industry consulting firm issued a report that projected higher energy prices. A barrel of light crude settled at $50.83, up 70 cents, on the New York Mercantile Exchange.
The bond market moved sharply higher as the automakers’ debt downgrades sent investors looking for safer government issues. The yield on the 10-year Treasury note fell to 4.15 percent from 4.19 percent late Wednesday. The dollar was lower against most major currencies, while gold prices rose.
Before the automakers’ downgrades, stocks traded narrowly higher as investors marked time ahead of Friday’s important job creation report from the Labor Department. The market had been up for four straight sessions, and some analysts had started talking about sustained improvement in the markets. However, the market’s mood proved too tentative to keep the rally going.
“People are still pessimistic,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “I think we saw the bulk of the panic selling a few weeks ago, but while the market is stabilized, we’re still getting mixed news.”
Wall Street had welcomed a Labor Department report showing a 2.6 percent annualized hike in worker productivity in the first quarter, the best increase in nine months. The report also noted that labor costs, while climbing, rose less than productivity — which means companies are getting more out of their workers without undue costs.
Retailers’ sales reports showed gains at traditional department stores and wholesale clubs, but slower growth at big discount chains — a sign that lower-income Americans might be spending less due to higher gasoline prices.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 1.61 billion shares, compared to 1.8 billion on Wednesday.
The Russell 2000 index of smaller companies was up 0.42, or 0.1 percent, at 595.64.
Overseas, Japan’s markets were closed for a national holiday. In Europe, Britain’s FTSE 100 closed up 0.41 percent, France’s CAC-40 gained 0.8 percent for the session, and Germany’s DAX index rose 0.82 percent.