New York - GM lost more than 15% of its share price Wednesday reaching its lowest level in over 50 years after Merrill Lynch cut General Motors rating to 'underperform'. Combined with record oil prices, investors lost confidence in stocks with Dow giving up 166 points at the close.
General Motors (NYSE: GM) reported US auto sales fell 18.2% in June, though less than analysts had expected. While in Canada, GM auto sales fell 23.8% and light truck sales were down 35%. Yesterday, Ford Motor Co. (NYSE: F) reported a 27.9% drop in June US auto sales which sent Ford's stock tumbling as the first US automaker to report June sales.
Toyota Motor Co. (NYSE: TM) reported a 21.4% drop in June US auto sales as well and the worst decline came from Chrysler LLC with a 35.9% drop in June auto sales in the United States. The entire sector fell. But after Merrill Lynch lowered its rating on General Motors, doubt over whether GM could muster the financing to weather the economic downturn took hold on Wall Street and with it grew doubts over the US economy as a whole after crude oil futures reached a record high of over $144 a barrel largely due to a greater-than-expected drop in US stockpiles.
The Dow, which had traded up early in the session Wednesday lost ground and by the closing bell had given up 166 points to finish the day at 11,215 for a loss of 1.46%. The broader S&P 500 index finished down 23 points, or 1.82 percent, at 1,261. Even the Nasdaq national Market Index gave up ground, losing 53 points, or 2.32 percent, to close at 2,251, despite a rally in Yahoo! Corp. (Nasdaq: YHOO) shares this morning on speculation that Microsoft Corp. (Nasdaq: MSFT) had renewed its interest in acquiring the search provider.
This morning the Energy Department reported that for the week ending June 27, 2008 US oil stocks were down by 2 million barrels, which was 800,000 more-than-expected by energy pundits who track oil. On the NYMEX, crude oil futures for August delivery traded up into record territory on the news. With stocks near a bear market signal of a 20% drop on the S&P 500 Index, electronic trading is near a selloff and many investors moved into the dollar denominated positions in energy futures as a hedge against the equities market.
Gold futures continued rising Wednesday as well, closing up $2.00 an ounce at $946.50. September Silver contracts followed gold higher, rising 14 cents to close at $18.83 an ounce. In base metals, copper futures for September delivery shot up 15 cents a pound to close at $4.06 after having traded as high as $4.08 a pound.
Corn and soybean futures rose as well after weather patterns revealed potentially lower acreage than the latest USDA forecast. December corn rose 28.5 cents to $7.80 a bushel while November beans closed up 20 cents at $16.30 per bushel on the Chicago exchange.
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