Markets Lose Gains After Chrysler Files Bankruptcy
Thursday, April 30, 2009; 5:24 PM
Wall Street gave up its early gains today after Chrysler became the first of Detroit's Big Three automakers to file for bankruptcy.
Last-minute negotiations between the government and the automaker's creditors broke down last night. President Obama said the company's bankruptcy would allow it to emerge stronger. The bankruptcy plan includes pumping billions more government aid into the firm and replacing Chryler's chief executive Robert L. Nardelli.
The blue chip Dow Jones industrial average closed down 0.2 percent, or 18 points, while the broader Standard & Poor's 500 index lost 0.1 percent or just under one point. The tech-heavy Nasdaq was up 0.4 percent or 5 points.
Chrysler is privately held, but competitors Ford and General Motors were up 9 and 6 percent. GM was seeing the biggest increases on the Dow. Analysts have said if one automaker falters, its rivals could pick up marketshare.
Despite the markets sluggish performance today, stocks ended the month in positive territory. The S&P was up more than 9 percent for the month, its best monthly gain since 2000. The major indexes have also now seen back-to-back monthly gains. The Dow is up 15 percent during the past two months. But, except for the Nasdaq, the major indexes remain in negative territory for the year.
Chrysler is privately held, but competitors Ford and General Motors were up 10 percent and 6 percent respectively. Analysts have said if one automaker falters, its rivals could pick up market share.
Stocks had rallied yesterday after the Federal Reserve said it found signs the recession is easing and failed to take additional steps to stabilize the economy, leaving a key interest rate at a historic low. Today, investors initially shrugged off new poor economic data before turning lower this afternoon.
Initial jobless claims fell by 14,000 to 631,000 last week, according to a Labor Department report. But the claims rate remains at a historically elevated level and the number of people collecting unemployment increased by 133,000 to 6.27 million -- another record.
Personal spending fell by 0.2 percent in March in inflation-adjusted dollars, according to Commerce Department figures released today. Consumer spending accounts for two-thirds of the gross national product, and economists have said its stagnation indicates that the economy is still weak.
"Looking forward, another steep drop in employment is on the way for April and we expect consumers to stay cautious," Nigel Gaul, chief U.S. economist for IHS Global Insight, said in a research note. "Although the worst does seem to be behind us, we see consumer spending moving sideways over the next six months or so."
Meanwhile, investors cheered by some better-than-expected earnings reports. Dow Chemical was up 18 percent after reporting earnings of $24 million during its first quarter. That represented a 97 percent drop in earnings, but beat analysts' expectations.
"Our positive earnings in this recessionary environment were the direct result of our rapid actions to reduce costs and tightly manage operations," Andrew N. Liveris, chairman and chief executive officer, said in a statement.
Overseas stocks were also up. London's FTSE and the Dax in Germany were up around 2 percent, while Japan's Nikkei climbed 4 percent.