Updated from 12:44 p.m. EST
Stocks in New York were slipping back into negative territory Wednesday afternoon, as traders mulled the prospect of a bailout for the automakers and several disheartening economic reports.
Dow Jones Industrial Average
was down 98 points at 8320, and the
was losing 10 points to 838. The
fell 9 points to 1440.
Traders were closely watching the automotive sector as the
continued to petition Congress for emergency funds.
on Tuesday had presented business plans to Congress in hopes of garnering a federal bailout. General Motors asked for $12 billion in low-interest financing and a $6 billion line of credit, and Ford requested $9 billion in government aid.
GM and Chrysler also said they would need $4 billion and $7 billion respectively just to make it to the end of 2008.
Marc Pado, U.S. strategist for Cantor Fitzgerald, said that because it is so difficult to raise money in the open market, the government needs to help the automakers. He also stressed that the deal before Congress is not a bailout, but rather a bridge loan that is a vital prop to the fragile economy. "If you do not want to see 10% unemployment, you need to act on GM and Ford and Chrysler," he said.
, meanwhile, announced it would cut production in December and reduce managers' winter bonuses as it copes with the economic downturn.
The day's economic data offered little in the way of encouraging surprises.
from Automatic Data Processing showed that 250,000 jobs had been lost that month, more than the 205,000 anticipated by economists. The October unemployment figure was revised to 179,000 from 157,000.
A November non-manufacturing index from the Institute for Supply Management registered at 37.3, substantially below analysts' prediction of 42 and down from 44.4 in October. The
so-called beige book of anecdotal economic reports is due out later today.
However, revised third-quarter productivity grew at a rate of 1.3%, according to the Department of Labor. The reading was above consensus estimates of 0.9% and up from 1.1% in the second quarter.
"The jobs number is going to be the next big shoe to fall on Friday," said Marc Pado, U.S. market strategist for Cantor Fitzgerald, referring to the Department of Labor's November nonfarm payroll numbers. He said that the ADP data are nevertheless in line with consensus estimates for a loss of 325,000 jobs for the month, and productivity and unit labor costs showed improvement.
Pado said he foresees choppy action in stocks until the end of 2008, then an abatement of selling pressure and a January rebound. "Things don't turn around on a dime," he said.
Numerous companies on Wednesday announced changes in their business models and financial policies as the economic environment shifted. Among financial firms,
The Wall Street Journal
was thinking about starting an Internet banking business.
Bank of America
may reduce its headcount by 30,000 as it merges with
, according to a report by
Another report, this time from
, indicated that Merrill would cut its year-end bonuses in half.
Elsewhere, mining company
said it was suspending its dividend on declines in copper and molybdenum prices.
Research In Motion
cut its third-quarter revenue and earnings-per-share forecasts, saying a stronger dollar and weaker U.S. economy would hurt its results.
On the merger front,
Electricite de France
said it was planning to issue a bid of $4.5 billion for U.S. power company
Shifting to commodities, crude oil was gaining 2 cents to $46.98 a barrel. Gold was losing $5.40 to $777.90 an ounce.
Longer-dated U.S. Treasury securities were falling in price. The 10-year note was down 24/32 to yield 2.76%, and the 30-year was losing 1-28/32 to yield 3.26%. The dollar was rising vs. the euro and pound but falling against the yen.
European exchanges, such as the FTSE in London and the DAX in Frankfurt, were gaining ground. Asian markets, including Japan's Nikkei and Hong Kong's Hang Seng, finished on the upside.