Stocks plunged to new lows for the year yesterday as investors bailed out of shares of General Motors, the ailing king of the car business.
GM's stock price dropped to its lowest level in more than a decade as the automaker's troubles mounted. Company executives yesterday pleaded with union leaders for help in controlling health care costs. Questions have been raised about how GM accounted for a couple of transactions with Delphi, an equally troubled former subsidiary, and Wall Street is now anticipating that GM's credit rating may soon be cut to junk-bond status. GM stock lost almost 6 percent, falling $1.67 a share to $26.66.
What's bad for General Motors is bad for the stock market, because GM is a key component of the Dow Jones industrial average. Yesterday, the company was the Dow's biggest loser on a percentage basis.
Suffering a triple-digit loss for the second day in a row, the Dow fell 125.18, to 10,278.75. The Nasdaq Stock Market composite index fell nearly 28 points, to 1162.05. The Standard & Poor's 500-stock index closed down almost 12 points at 1946.71.
All three indicators closed at new lows for the year. So far this year the S&P 500 has fallen 4.1 percent, the Dow 4.7 percent and the Nasdaq 10.5 percent.
Some investors fear that GM's woes reflect strains within the whole economy. Shares of other manufacturers, raw materials companies and railroads also fell. All those are cyclical industries, whose fortunes -- and stock prices -- tend to move up and down with the economy.
"It does feel like the economy is beginning to slow," Michael Vogelzang, chief investment officer at Boston Advisors, told Bloomberg News. "Most importantly, you've got earnings deceleration. The market has a really tough time making headway in that environment."
Concerns about a slowing economy were reinforced by a government report on business inventories, which showed that companies are building stockpiles more slowly than they had been.
"You are seeing some real cautious behavior out in the marketplace in terms of how much inventory people carry and how aggressively they are going to attempt to grow their business," Philip Marineau, chief executive at Levi Strauss, told Bloomberg this week.
Rates on mortgages fell slightly, which is a plus for the housing industry but is also regarded as a sign of a weakening economy.
