Stocks on Wall Street Rack Up More Big Losses

Robert Pavlik, chief investment officer for Oaktree Asset Management, said that a bankruptcy by the automakers would reverberate throughout the markets. Companies such as Johnson Controls (JCI Quote), which makes auto interiors, Goodyear Tire (GT Quote) and the technology companies that make cars' computer chips are dependent on the manufacturers. "It's more of an octopus than you can imagine," he said.

Pavlik also said automakers' employees would also suffer if Congress did not intervene. Even so, "You have plenty of other negatives out there for this economy and [an automaker bailout] is not going to solve it," he said.

Shares of GM (GM Quote) and Ford (F Quote) pared their gains, but were still up 6% and 14%, respectively.

While the Senate pact trumped other headlines from the auto sector, that didn't stop the group from making news in other regards. The Financial Times, citing a person familiar with recent discussions, reported that Chrysler is looking to reinvigorate merger talks with GM as the companies face increasing cash-flow troubles.

Additionally, GM's partly owned financing arm GMAC applied with the Federal Reserve to become a bank-holding company, a transformation that would secure it access to funds offered by the Troubled Asset Relief Program.

Traders were also being affected by the fact that the major averages began to violate technical support levels, notably, the S&P 500's Oct. 27 low of 848 and a retest of that area on Nov. 13.

Phil Roth, chief technical market analyst at Miller Tabak, said that the next support areas he's using as benchmarks are the S&P's and Dow's 2002 lows, at 769 and 7200, respectively. On the upside, Roth said there's significant resistance for the S&P at 1000, and that a breakout above 866 would be the first sign that the markets may have turned around.