Stocks Steeped in Losses

Smith said bankruptcy would allow the profitable arms of such companies to keep going, while sloughing off the parts that are losing money. If the government intervenes to stave off bankruptcy, "Effectively they're allowing these businesses to keep on existing in the state they are. And it ends up being a zombie state. It's almost self-defeating, the fact that you're going to supply money to the financial arm. Trying to sell cars and machinery in a recession, it doesn't make sense," he said.

Meanwhile, a report by Bloomberg indicated the Fed is attempting to become the main regulator for the credit-default swaps market. The Fed and other government agencies are working to develop a clearinghouse for the $33 trillion CDS market.

In a further sign of trouble in the financial sector, Reuters reported that Morgan Stanley's (MS Quote) chief financial officer said the company would lower its headcount by 9% after already cutting jobs 10% earlier this year.

The government also was moving toward aid for the automakers. House Speaker Nancy Pelosi suggested financial assistance for the industry, which includes General Motors, Ford and Chrysler. GM and Ford last Friday announced troubling quarterly losses that led some to question the future viability of the U.S. auto sector.

In the energy sector, Exelon (EXC Quote) announced it would take its buyout bid for NRG Energy (NRG Quote) straight to shareholders after NRG on Monday rejected Exelon's offer.

As for technology companies, Microsoft (MSFT Quote) is working on a deal with Verizon (VZ Quote) to provide the default search software for Verizon Wireless' phones, according to a report by the Journal.