Oil slides below $50 a barrel amid economic concerns
NEW YORK (MarketWatch) -- U.S. stocks continued to slump to fresh five-year lows Thursday, with concerns about the economy and the ailing financial and auto sectors leading the market to fresh five-year lows.
In recent action, the market was recovering some ground after testing those technical levels.
The economic backdrop continued to worsen, with weekly jobless claims jumping to their highest level in 16 years, while a Philadelphia manufacturing survey and a report on leading economic indicators both worsened last month.
"There is a chance [stocks] will go much lower with rising questions about the depth of the recession," said Owen Fitzpatrick, head of U.S. equity at Deutsche Bank. "In the next round of the credit crisis, the market is now concerned with commercial mortgage-backed securities."
Treasury Secretary Henry Paulson has announced that his administration won't use some of the $700 billion from the Troubled Assets Relief Program to buy debt securities.
The Dow Jones Industrial Average fell 33 points, or 0.4%, to 7,952, with 19 of its 30 components trading in the red.
Among Dow components, General Motors Corp. ) plunged nearly 30%. Amid concerns about a possible bankruptcy for the auto giant, GM's financing unit GMAC applied to become a bank holding company to access emergency cash from the government.
Citigroup Inc. also plunged, off 20%, even after Saudi investor Prince Alaweed said he would raise his stake in the bank to 5%.
The S&P 500 index fell 10 points to 796, while the Nasdaq Composite lost 4 points to 1,382.
Economic concerns also drove a barrel of crude oil to briefly slump below $50 for the first time in more than three years. See Futures Movers. But the move, seen more as a sign of how bad the economic outlook has become than as a positive for consumers, failed to provide much relief to the market.
The energy sector was the worst performer on the S&P, falling more than 8%, followed by financials, which fell 6%, and materials, off more than 3%.
Stocks were crushed to 5-1/2-year lows Wednesday, with credit market-led fears and Citigroup's $17 billion balance sheet addition punishing markets. The Dow Jones Industrial Average dropped 427 points, the S&P 500 lost 52 points and the Nasdaq Composite fell 52 points.
Overseas, the Swiss National Bank made a surprise and steep one percentage point rate cut Thursday.
Still, markets were lower on the session.
"The next 48 hours could be volatile, due to the uncertainty of the bailout of the Big Three U.S. automakers, weak financials and options expirations on Friday," said strategists at BNP Paribas.
Complicating matters, the asset-backed and commercial mortgage-backed securities that many financials hold have seen pressure as Treasury Secretary Henry Paulson announced that the government won't use the Troubled Assets Relief Program to buy debt securities.
Weekly U.S. initial jobless claims rose by 27,000 to 542,000 in the week ending Nov. 15, the highest since July 1992, the Labor Department reported Thursday.
Leading indicators for October and a Philadelphia-area economic gauge for November also are due for release.
The yield on two-year U.S. government bonds slipped a basis point to 1.06% as the march toward 1% continued.
Paul Rodriguez, a technical strategist at Lloyds TSB Corporate Markets, suggested buying two-year note futures until equities find a floor.
Major earnings will come after the close when Dell Limited Brands and The Gap report results.
Grand Canyon Education priced its initial public offering at $12, the low end of a twice-lowered range as it ended the longest IPO drought in a decade.
Overseas, the pan-European Dow Jones Stoxx 600 lost over 4%, while the Nikkei 225 fell nearly 7% in Tokyo.
Job cuts between 1,400 and 2,700 each were announced by AstraZeneca , Rolls-Royce, Sandvik and PSA Peugeot Citroen.
