31 Mar 2009

Wall St hits the brakes on auto industry woes

10:04 pm on 31 March 2009

US stocks tumbled on Monday as two major vehicle manufacturers took a step closer to potential bankruptcy.

In the latest efforts in its campaign to shore up the economy and struggling corporations, the US administration forced out General Motors' chief executive, pushed Chrysler LLC toward a merger and threatened bankruptcy for both. The companies received a government bailout in December.

General Motors shares tumbled 25.4% to $US2.70, while shares of supplier companies also fell sharply as investors worried that a potential bankruptcy would send ripple effects through the entire economy. Shares of American Axle & Manufacturing sank 22.2% to $US1.37.

The Dow Jones industrial average lost 254.16 points, or 3.27%, to 7,522.02. The Standard & Poor's 500 Index tumbled 28.41 points, or 3.48%, to 787.53. The Nasdaq Composite Index fell 43.40 points, or 2.81%, to 1,501.80.

US banks' stocks slid after Spain, Germany and Britain acted to bolster lenders as the sector felt the impact of rising bad loans.

The KBW Banks index fell 10.3% as the spate bank rescues heightened concerns over the health of the financial system.

US Treasury Secretary Timothy Geithner said over the weekend that some banks still need large amounts of help.

Before Monday's sell-off, stocks had rallied around 20% after hitting fresh 12-year lows in early March.