Wednesday’s comeback didn’t last. The markets tumbled today as General Motors (GM) and Citigroup (C) continued to show horrible signs. The Dow Jones industrial average dropped 281.4 points (-4.09%) to 6594.44 and the S&P 500 lost 30.32 points (-4.25%) to end the day at 682.55.
In a report given today, GM said that it was nearing bankruptcy. Independent auditors analyzing the company stated that there is “substantial doubt” as to whether GM can overcome massive losses and bring in enough money to stay in business. The odds are stacked against the Detroit-based automaker, as it must prove to the government by March 31st that the company can become viable again. GM posted a $30.9 billion loss last year; it has been helped by $13.4 billion of government loans and the company is seeking up to $30 billion more. The company lost 34 cents, or 15.5%, to end at $1.86 on the day.
Thinking of Citigroup’s history in the past months brings images of trains derailing in my mind. The major bank has suffered nothing short of a catastrophe: it used to be the biggest publicly traded bank based on assets and market capitalization, but its market cap is currently $6.2 billion, whereas in early 2008 it was around $270 billion. The company’s stock was trading above $20. At one point today, the stock traded at 97 pennies per share.
Tomorrow will be an incredibly important day for the markets, as the government’s February jobs report will be released. Analysts surveyed by Reuters expect that 648,000 jobs were lost last month. Losing this number of jobs would bring the unemployment rate to 7.9%. These expectations alone are dismal: this unemployment rate would be a 25-year high. We could see a horrible day on the markets if actual job losses are greater than the expected number.
As the market dips lower and lower, wary investors will search for signs of a bottom. To find a bottom, we need to determine the overall market sentiment. If people believe things can get worse, we haven’t seen a bottom. When people yank their hair out and scream that things “can’t get any worse”… a bottom may be in sight. While this makes for a painful process, let’s hope the bottom comes sooner rather than later.
-Matt Schwartz
College Trillionaire
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