Stocks are continuing their descent Monday afternoon on news that GM CEO Rick Wagoner has been asked to step down by the Obama administration.
At 1:33 pm ET, the Russell 2000 (NYSE:IWM) is down 12.97, or 3.02%, at 416.03, while the Dow is down 3.34% at 7,516.60 and the S&P 500 is down 3.4% at 788.18.
This morning the White House rejected turnaround plans from GM (NYSE:GM) and Chrysler. In response to the rejected proposals, the Obama administration pushed out GM's Wagoner and directed Chrysler to move quickly to forge a partnership with Fiat if it expects to receive additional government assistance. Wagoner was replaced with GM COO Fritz Henderson.
Small-cap Providence Service Corp. (Nasdaq:PRSC) is up over 30% this afternoon after the company guided earnings above estimates. Also climbing higher today is small-cap retailer Shoe Carnival, Inc. (Nasdaq:SCVL), rising 15% on higher-than-average volume, and InterDigital, Inc. (Nasdaq:IDCC), up 16% after cutting 100 jobs and announcing a business realignment.
******I didn’t know former General Motors CEO Rick Wagoner was so popular. The morning headlines in the financial press make it sound as though stocks are selling off because Wagoner and other auto industry executives failed to put forth strong enough turnaround plans to guarantee more government loans.
Never mind that the S&P 500 rallied 167 points, or 25%, over the last two weeks. Ignore the possibility that one of the sharpest rallies in stock market history might have some investors taking profits.
Now, that’s not to say that the hard line taken by the Obama administration toward the automakers isn’t affecting the stock market. It is. But just as the market rallied on news starting March 9, the bad news from the automakers is a catalyst for selling. News tends to catalyze investors’ predispositions.
*****The suggestion by the Obama administration that Wagoner step aside if GM is to get any more government money is certainly interesting. I’m sure that there will be many pundits criticizing the President for this move. After all, do we believe that President Obama knows more about making cars than a Detroit CEO?
Even though Wagoner pinned his company’s future on the Hummer . . .
