NEW YORK - US stocks took a beating Wednesday after a profit warning from General Motors and a new record high on the oil market heightened fears about risks to economic growth.
The Dow Jones Industrial Average dropped 88.53 points (0.82 percent) to 10,656.57 while the Nasdaq composite shed 12.08 points (0.59 percent) to 2,022.90 at 1635 GMT.
The Standard and Poor`s 500 broad-market index retreated 7.20 points (0.60 percent) to 1,190.55.
Investor expectations of a solid first quarter earnings season took a knock after General Motors cut its first quarter and full-year earnings outlook, forecasting a loss even before special charges.
The market shrugged off upbeat news on US industrial production and housing starts. But the dollar came under fresh pressure after the government reported a record current account deficit for the fourth quarter that put the 2004 balance of payments gap at an all-time high of 665.5 billion dollars.
Adding to the market`s woes, crude oil futures soared to new record highs in New York and London as traders poured in more cash following disappointing data on US inventory levels and hints that China would stockpile more reserves.
New York prices surged to as high as 56.30 dollars a barrel, eclipsing all-time highs hit last October. "It`s a one-two-three punch," said Jay Suskind, director of trading at Ryan, Beck and Co.
"First, GM, the bellwether, on the opening, took the market down with it and then oil gave us the one-two punch. And you`re seeing a little rally in the bond market as some people think the stock market may not be a great place to be here."
GM, one of the 30 Dow blue-chip stocks, cited weak sales and production volumes in North America, a tougher pricing environment and a more car-based sales mix.
Paul Mendelsohn, chief investment strategist at Windham Financial Services, said the GM news was "horrendous" for Wall Street.
"GM seems to be the trigger and then everything else is just building on top of it," he said.
"It`s one of the first major profit warnings we`ve had and coming from such a large blue-chip that makes up such a large part of the economy, it could have a ripple effect through the entire system."
GM shares, also hit by fears of a credit downgrade, plunged 4.45 or 13 percent to 29.27.
The warning from the world`s biggest carmaker and a decline in Western European auto sales in February weighed on the rest of the sector. Ford fell 47 cents to 11.76 while DaimlerChrysler gave up 65 cents to 45.46.
Among the few bright spots, Toys "R" Us shares rallied 64 cents to 24.73 as two companies came forward to buy the ailing toy and children`s clothing group for more than 5.5 billion dollars, according to reports.
In the finance sector, Bear Stearns slumped 3.30 to 102.73 despite reporting first-quarter results that handily topped analyst estimates.
Some investors flocked to the relative safety of the bond market. The yield on the 10-year US Treasury bond dipped to 4.486 percent from 4.542 percent Tuesday and that on the 30-year bond to 4.790 percent against 4.813 percent. Bond yields and prices move in opposite directions.
03/16/2005 16:48 GMT