Wall Street pointed the finger at General Motors today, blaming a false rumor that GM may file for bankruptcy for another lousy day in the stock market.
GM stock dropped $1.88 a share to $27.29 based on the bankruptcy canard and the actual news that the Securities and Exchange Commission is investigating GM's pension accounting and its dealings with Delphi, the parts-maker that went bankrupt after being spun-off from GM.
Though the auto giant promptly and unequivocally denied it is considering bankruptcy, the allegation itself was enough to bring down the value of GM bonds and to spook the whole market.
The fact that anybody would take seriously a report that GM could be headed for bankruptcy reveals not only how far GM has fallen in investors' eyes, but also that the automaker still exerts a major impact on the market. GM's decline knocked 15 points off the Dow Jones industrial average, but 25 other Dow stocks also fell, driving the index down a total of 115 points to 10,229.95.
For all the talk about GM, the real damage to the market was done by smaller stocks, which sold off broadly and sharply, hitting the Nasdaq Stock Market composite index even harder than the Dow.
The Nasdaq composite closed down 36 points at 2,063.81 -- a 1.7 percent loss compared to the 1.1 percent decline by the Dow and a similar percentage loss by the Standard & Poor's 500 stock index. The S&P slid 12 points to 1,178.90.
Today's loss, the third in a row for the market, pushed the Dow almost back to where it was before Monday's Ben Bernanke Rally. That day, the market celebrated the appointment of the new Federal Reserve chairman with a 169-point gain in the Dow, but since then, the Dow has given back all but 14 points of that advance.
The overriding issue for investors is corporate profits, which appear to be getting pinched between the slowing economy and rapidly rising energy prices and interest rates.
Today Liz Claiborne Inc., the women's clothing maker, and Goodrich Corp., the tire company, issued warnings that their earnings will not be as strong as previously forecast.
That all-too-familiar forecast helped spread the losses across the market. Six stocks retreated for every one that rose, the New York Stock Exchange reported.
Wall Street's worries were reinforced by two government reports that also suggested the economy is slowing. Orders for durable goods fell 2.1 percent last month, and new home sales rose less than expected.