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Late selling sends Dow down more than 675
Stocks hit their lowest level in five years after a major credit ratings agency said it was considering cutting its rating on General Motors Corp.
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NEW YORK — Stocks plunged in the final hour of trading today, sending the Dow Jones industrial average down more than 675 points, or more than 7 percent, to its lowest level in five years after a major credit ratings agency said it was considering cutting its rating on General Motors Corp.
The Standard & Poor's 500 index also fell more than 7 percent.
The declines came on the anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39 percent, since closing at 14,198 a year ago. The S&P 500, meanwhile, is off 655 points, or 42 percent, since recording its high of 1,565.15.
Thursday's sell-off came as Standard & Poor's Ratings Services put GM and its finance affiliate GMAC LLC under review to see if its rating should be cut. GM has been struggling with weak car sales in North America.
The action means there is a 50 percent chance that S&P will lower GM's and GMAC's ratings in the next three months.
S&P also put Ford Motor Co. on credit watch negative. The ratings agency said that GM and Ford have adequate liquidity now, but that could change in 2009.
GM led the Dow lower, falling $2.15, or 31 percent, to $4.76, while Ford fell 58 cents, or 22 percent, to $2.08.
"The story is getting to be like that movie Groundhog Day," said Arthur Hogan, chief market analyst at Jefferies & Co. He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains stubbornly high despite the Fed's recent rate cut.
"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," Hogan said. "Everything we're seeing his historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."
According to preliminary calculations, the Dow fell 678.91, or 7.3 percent, to 8,579.19. The blue chips hadn't closed below the 9,000 level since the June 30, 2003.
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