Updated from 4:17 p.m. EDT
Stocks in New York closed above their worst levels of the session Monday, but the major averages still ended sharply lower as renewed worries swirled around the health of the automaking and financial-services industries.
Dow Jones Industrial Average
dropped 254.16 points, or 3.3%, to 7522.02, and the
lost 28.41 points, or 3.5%, to 787.53. The
fell 43.40 points, or 2.8%, to 1501.80.
Industrials and financials were hard hit on
down 14.2% and 9.3%, respectively.
Bank of America
lost 17.9%, and
One of the worst performers in the market was
, which tumbled 25.4% to $2.70 after the
said neither GM nor
have submitted acceptable restructuring plans and that at this point they need to do more to get additional government aid.
As a result, GM CEO Rick Wagoner was forced out from the company over the weekend.
President Obama said "
as a tool" with the backing of the U.S. government may be a solution. The president reassured car buyers that the government will stand behind the warranties on cars made by the shaky automakers.
Meanwhile, government officials said Chrysler cannot function as an independent company under its current plan, and they gave it 30 days to complete a proposed partnership with Italian automaker Fiat. Washington will offer up to $6 billion to the companies if they can negotiate a deal before the deadline.
The leaders of the world's biggest economies will gather at a G-20 summit later this week to discuss solutions to the global economic crisis. The group hopes to restore global growth by the end of 2010, according to a
report, citing a draft document for the gathering.
Banks and financials were sliding after Treasury Secretary Tim Geithner said this weekend that some firms probably would need
"It's too soon to tell if the buying stampede is over because we got hit by the GM and Chrysler news and the banks needing more aid," says Jeff Saut, chief investment strategist at Raymond James. "But we went from being generationally oversold to overbought. It's pretty critical that the market gathers itself together, and then the question becomes are we going to go sideways and work off the overbought condition and re-rally, or are we going to retest the lows?"
That might depend somewhat on how the first quarter turns out. The period ends Tuesday and Alcoa kicks off the quarterly results in just more than a week.
"Given the actual loss in earnings for the fourth quarter and a still moribund economy in the first quarter, are the surprises likely to support a market that has already jumped 20%?" asks Paul Nolte, director of investments at Hinsdale Associates. "Until we see more than scattered improvement in a few minor data points, we will keep the champagne on ice."
At least one analyst is speculating that U.S. banks
soon to take advantage of a run-up in their share prices. Those shares were each down.
Elsewhere, life insurer
plunged 38.2% to $6.41 after withdrawing its application for funding guarantees from the U.S. government. Lincoln disclosed late Friday that it no longer believed it would qualify under the provisions of the Temporary Liquidity Guarantee Program (TLGP).
dropped 28.2% to $3.23 after data on its obesity drug met the goals of a study but underwhelmed analysts.
In commodities, oil lost $3.97 to settle at $48.41 a barrel, and gold fell $7.60 to $917.70 an ounce.
Longer-dated Treasuries were recently rising, with the 10-year note adding 13/32 to yield 2.7% and the 30-year gaining 8/32, yielding 3.6%.
Stocks overseas were largely lower. The Dax in Frankfurt lost 5.1%, and London's FTSE fell 3.5%. Hong Kong's Hang Seng and Japan's Nikkei lost more than 4.5% apiece.