Fate of GM negatively effects stocks

NEW YORK – Wall Street retreated Monday as traders speculated about the future of General Motors Corp. and awaited a flurry of earnings reports and data that could provide insight into the direction of the economy.

Major stock indicators pulled well off their lows in afternoon trading amid light volume. The Dow Jones industrial average fell about 50 points after being down nearly 120.

The slide came as Boeing Co. and Chevron Corp. said the weak economy was hurting their results. But several big banks bucked the trend as investors bought shares ahead of their quarterly reports in the coming days.

The pullback after a long holiday weekend was orderly and suggested that cautious traders were reluctant to give up on a five-week rally. Traders could jump back into buying mode if the flurry of corporate earnings reports or economic figures due this week don’t come in as badly as feared.

“If you get a couple earnings reports that are better than the worst that people expected, then that might help,” said Denis Amato, chief investment officer at Ancora Advisors.

The market was unsettled Monday by a New York Times report saying the Treasury has directed GM to lay the groundwork for a potential bankruptcy filing by June 1. GM might be forced to file if it cannot complete a plan to exchange debt for equity, according to the report.

In midafternoon trading, the Dow fell 50.10, or 0.6 percent, to 8,033.28.
Boeing fell 6 percent as analysts cut their ratings and estimates for the airline manufacturer after it said it would reduce production of some jetliners next year due.

Chevron lost 2 percent after saying first-quarter earnings will be sharply lower due to falling oil and natural gas prices.

Investors are also looking to a spate of earnings results throughout the week, including reports from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc.

Financial companies had been among the hardest hit by the economic downturn and credit crisis, but they have also helped lead a rally over the past month.

Goldman rose 4 percent, JPMorgan rose 2 percent and Citigroup rose 16 percent, while Bank of America Corp. rose 12 percent. Analysts said some of the buying could reflect traders stepping in to cover misplaced bets that banks would fall when they post results this week. Traders who sell stocks “short” are forced to buy to avoid further losses.

On Thursday, a surprise announcement by Wells Fargo & Co. that it will report a record quarterly profit for the first quarter helped send the market sharply higher ahead of the weekend. Markets were closed for Good Friday.

GM was the biggest decliner among the 30 stocks that make up the Dow as investors worried about what a bankruptcy might mean for the economy. GM fell 34 cents, or 16.7 percent, to $1.70.

Jamie Cox, managing partner at Harris Financial Group, said the possible consequences of GM bankruptcy filing will likely weigh on the market. “Think of the economic fallout potential,” Cox said.