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Crude oil is down for a third straight session today and natural gas is tumbling for the seventh time in nine sessions.
Maybe it’s still wishful thinking to believe that the energy bull market has been broken, but the action in oil and gas stocks suggests that the thought has crossed the minds of more than a few investors.
How about this: Shares of Exxon Mobil Corp. fell to a 52-week low of $79.85 early today. The stock has slumped 15% from its recent peak of $94.56 on May 20.
 Chevron Corp., off 88 cents to $85.51 at about 11 a.m. PDT today, has tumbled 17% since peaking at $103.09 on May 20.
The XOI index of 13 major energy stocks is down 1% so far today, the eighth drop in nine sessions. The index is off almost 20% from its May high and is just about 3% above its 52-week low reached in August.
Energy-stock investors have racked up massive paper profits over the last five years, of course, so profit-taking shouldn’t be surprising at this point.
But the weakness in the stocks is underscoring the idea that record oil prices have done some serious damage to the global economy that may well loop back into sustained lower energy consumption.
Growth is slowing even in China, which on Wednesday said its economy expanded at an annualized rate of 10.1% in the second quarter, compared with 11.9% for all of 2007.
Crude oil futures in New York were off $3.66 to $130.94 a barrel at about 11 a.m. PDT. They’ve fallen almost 10% from the record high of $145.29 on July 3.
Natural gas is off 87 cents to $10.53 per million British thermal units today. Gas has plummeted 22% from its recent peak of $13.58, also reached on July 3.
Photo: Going down, and soon? Credit: David McNew/Getty Images
Was today just manic enough on Wall Street to mark a short-term bottom in the stock market?
The Dow industrials slumped 227 points early in the day on Federal Reserve Chairman Ben S. Bernanke’s depressing assessment of the economy, rallied 295 points from the low (to a net gain of 68 points) as oil fell more than $6 a barrel and stayed there, then sank again in the final hour with financial stocks, as usual, leading the way down.
The Dow ended off 92.65 points, or 0.8%, to 10,962.54 -- the first close below 11,000 since July 2006. That extended the index’s decline from its October peak to 22.6%. Trading volume today was massive on the New York Stock Exchange.
 The market is "alternating between euphoria and depression. Sometimes in the same hour," said Steve Todd, editor of the Todd Market Forecast in Crestline, Calif.
But it’s often when the market looks the nuttiest that it’s on the verge of wringing itself out.
The bulls got one sign they’ve been waiting for: The so-called VIX index, which measures Wall Street’s fear level by tracking activity in put and call option contracts on the Standard & Poor’s 500 index, jumped above the 30 level for the first time since mid-March.
The last four times the index has been above that threshold -- in August, November, January and March -- it foreshadowed that the market sell-off of that moment was cresting, and that a rally (however fleeting) was imminent. Go here for more on the VIX’s recent history, including a chart.
The VIX surged as high as 30.81 early today before falling back to close at 28.54, up from 28.48 on Monday.
Something else that could push the bears back, for better or worse: The Securities and Exchange Commission’s new plan to curb short selling of major financial stocks, as reported here.
Still, financial-stock sellers -- short and otherwise -- continued to drive many big-name issues to new multiyear lows today, indicating no let-up in fears about the state of the banking system. They have TVs on Wall Street; they can see those lines outside IndyMac Bank branches.
Investors are betting "there are going to be a lot more shoes to drop" in the financial sector, said Art Hogan, veteran trader at Jefferies & Co.
Fannie Mae fell $2.66, or 27%, to close at $7.07, Freddie Mac tumbled $1.85, or 26%, to $5.26, Bank of America slid $1.63, or 8.1%, to $18.52 and Citigroup was off 66 cents, or 4.3%, to $14.56. For Citi, that was the lowest closing price since the company was created by the October 1998 merger of Citigroup and Travelers Group.
Photo: Edvard Munch's Expressionist masterpiece "The Scream." Solum, Stian Lysberg/AFP/Getty Images
Federal Reserve Chairman Ben S. Bernanke didn’t call it a recession today, but he might as well have.
In his semiannual congressional testimony on the economy, the Fed chief delivered a sober assessment that left no doubt about the central bank’s priorities.
Remember his tone in June, hinting that the Fed might soon raise interest rates to battle inflation pressures? Forget that -- despite another scary inflation report today.
 Bernanke’s speech "strongly suggests that Fed officials do not have their fingers on the tightening trigger," Goldman Sachs economists said in a note.
The Fed chief said policymakers felt that "considerable uncertainty surrounded their outlook for economic growth and viewed the risks to their forecasts as skewed to the downside."
Asked whether he thought the country was officially in recession, he said: "People are very worried, so I certainly would never make the claim that even if we were not in a technical recession, that it wasn’t a serious situation."
The stock market took this hard at first, with the Dow Jones industrial average diving 227 points early on. But the market has since rebounded, helped by a drop in oil prices that also appears to be driven by Bernanke’s recession-like tone.
Near-term crude futures in New York were down $6.71 to $138.47 a barrel at about 11 a.m. PDT. The Dow was basically flat at 11,060.
But Bernanke’s comments brutalized the dollar. The euro spiked to a record high of $1.604 today from $1.592 on Monday.
Photo: Ben Bernanke before the Senate Banking Committee today. Joshua Roberts/Bloomberg News
Here it is again, on the record: Bank of America Corp. CEO Ken Lewis doesn’t expect the bank to need to raise more capital or to cut the dividend on its stock, two moves many of its struggling rivals have been forced to make.
But in an interview in L.A. on Wednesday, Lewis acknowledged that his views on BofA’s ability to weather this economic storm depended on how many Americans are able to hold on to their jobs.
And he didn’t offer any near-term encouragement about the home-foreclosure situation, or about rising losses on the bank’s credit-card and home-equity-loan portfolios.
Lewis, 61, was in L.A. to give a speech ("Mending Our Mortgage Markets") to Town Hall Los Angeles and to visit the Countrywide Financial operations in Calabasas, nine days after Charlotte, N.C.-based BofA acquired the troubled mortgage giant. He also met with Times reporters and editors.
 Some excerpts from the interview:
--On the bank’s capital situation and its dividend payment (now $2.56 a share at an annual rate): "I’ll restate what I said two or three weeks ago. Given our view of things, we do not expect to cut the dividend nor do we expect to have to raise capital.
"We get investors and analysts calling us saying, ‘You’ve got to cut your dividend because the market is saying you should cut your dividend.’ We’ve reminded them that the market over the short-term is not always right."
At Wednesday’s closing stock price of $22.06, BofA’s annualized dividend yield was 11.6% -- far above the yields on most other big bank stocks.
--On the outlook for home foreclosures and repossessions: "We make projections but I can’t tell you that we feel like we’ve got our hands around it at this point."
Like other lenders, he figures much will depend on where, and when, home prices bottom. "We think nationwide that we’ve got another 15% housing decline, and we think it will probably go into at least the first quarter of next year."
In California, Florida and other previously red-hot markets, BofA expects a 20% additional price decline, on average, Lewis said.
--On growing losses on credit cards and home-equity loans: Credit card delinquencies have risen but "those still are within our ability to predict. We’ve done a good job of saying, 'Here’s about what we think they’ll be next month,' and they’ve been right in that area.
"That is not so with home equity. Home equity [loan] deterioration has been much more rapid than we predicted. Our portfolio has a lower loss rate than most but the rate of increase has been pretty substantial. And the severity of loss is much higher than in any other period because of the dramatic house price declines. You’re going from a secured product to an unsecured product."
Note here, Lewis is talking about BofA’s home-equity loan portfolio, not Countrywide’s.
--On the outlook for U.S. consumer spending: "I do think there’s going to have to be a retrenchment. The financial system is going to force that. Because you’re not going to get the same loans or the same terms you did before.
"To the extent that that retrenchment then causes a kind of a domino effect and therefore unemployment starts to rise higher than we think, then you’ve created a situation that is really ugly.
"If you can see unemployment levels peaking at 6% [compared with the current 5.5%] then I think we’re OK" in expecting the economy to begin reviving in mid-2009, he said.
If unemployment rises "substantially" above 6%, Lewis said, then "all bets are off."
Photo: BofA CEO Ken Lewis. Lawrence K. Ho/Los Angeles Times
For the stock market, it was one day out of the frying pan -- the next day into the fire. Again.
Share prices followed Tuesday’s rebound with a steep plunge today, as fears about the financial system again gripped Wall Street. Iran’s latest missile test didn’t help the mood.
The sell-off pulled the Standard & Poor’s 500 index into bear-market territory for the first time since the 2000-02 dive. It joins many other indexes that have been dragged into the bear cave in recent weeks.
The S&P 500 tumbled 29.01 points, or 2.3%, to 1,244.69, leaving it down 20.5% from its record closing high of 1,565.15 reached in October. A drop of at least 20% is Wall Street’s usual threshold for a bear market.
 "It’s a pretty ugly picture," said Brian Gendreau, investment strategist at ING Investment Management in New York. "It’s very hard to point to a catalyst for getting back into" stocks.
Unless losing nearly 24% of your capital in a day is your idea of fun. That’s what happened to investors in mortgage giant Freddie Mac today.
Despite attempts by federal officials to dispel concerns about the financial health of Freddie and its sister company, Fannie Mae, the market clearly isn’t buying it: Freddie plummeted $3.20, or 23.8%, to $10.26. Fannie slid $2.31, or 13.1%, to $15.31.
Wall Street was unnerved by another sign that investors are becoming less willing to extend credit to Freddie and Fannie, despite the implied government guarantee of their debt: Fannie Mae issued $3 billion in two-year notes today at an annualized yield of 3.27%, far above the 2.37% that the U.S. Treasury pays on two-year notes.
In theory, Fannie shouldn’t be paying this much on its debt -- if investors believed it was truly a solid credit.
And if there are doubts about Fannie and Freddie, that doesn’t bode well for financial giants that aren’t technically backed by the Treasury. Merrill Lynch sank $3.03, or 9.2%, to $29.74, its lowest since 2002.
What was bad for financials was bad for the rest of the market, as usual. Among the 10 major industry sectors in the S&P 500, only utilities were up for the day. In the tech sector, Cisco Systems crumbled $1.30, or 5.7%, to $21.58 after CEO John Chambers suggested his customers don't expect an economic recovery until 2009.
With forecasts like that, "You have to keep asking, 'Why would you want to buy stocks right now?' " said Dan McMahon, veteran trader at Raymond James & Associates.
Among major market indexes, the Dow industrials and the Nasdaq composite fell further into bear-market territory. The Dow slid 236.77 points, or 2.1%, to 11,147.44, the lowest close since August 2006; the Nasdaq gave up 59.55 points, or 2.6%, to 2,234.89.
The Dow now is down 21.3% from its record high in October.
Crude oil prices pulled back today after an initial jump, and finished up just 1 cent at $136.05 a barrel, following two days of heavy losses. But nobody seemed to be paying much attention to oil after financial-company jitters revived. If the financial system unravels, the cost of gas at the pump may be among the least of our problems.
Photo: On the floor of the New York Stock Exchange today. Andrew Harrer/Bloomberg News
Some notes from around the markets as the week kicks off:
--The bear claims a prominent victim: The Class B shares of Warren Buffett's Berkshire Hathaway Corp. slumped to $3,895 apiece at the end of last week, extending their loss to 21.9% from their record high of $4,985 in December. So Berkshire joins the Dow Jones industrial average, the Nasdaq composite and some other key indexes in bear-market territory, meaning a loss of at least 20% from the recent high.
Because of the breadth of its business and stock holdings, Berkshire is considered to be a mutual fund, of sorts -- albeit one heavily weighted with insurance businesses. The Class B shares have been favorites of small investors who wanted to buy into the Buffett legend but couldn't afford the Class A shares, which sell for 30 times as much.
--Bell-ringer for the global economy? What was behind the heavy selling last week in stocks of steel companies, coal miners and other industries that have been riding the strength of economic growth outside the U.S.? It might have been overdue profit-taking as the calendar turned to the new quarter. But if it continues this week, Wall Street may worry it's a sign that investors are beginning to fear that the world could fall into recession in the second half, amid sky-high energy prices and credit-tightening moves by an increasing number of central banks.
--New landlord comes to town: Bank of America Corp. CEO Ken Lewis will be in L.A. on Wednesday to address a meeting of Town Hall Los Angeles -- and maybe to check on his latest acquisition, Countrywide Financial, which BofA officially acquired last week. BofA's beleaguered shareholders can only hope for something in Lewis' Town Hall speech (the title: "Mending Our Mortgage Markets") that will stop the slow-motion crash in the stock, which ended last week at $22.40. It has lost almost half its value just in the last three months, a horrendous performance even in the context of the battered financial sector overall.
The stock market looks like it dodged a couple of bullets today, but the modest rebound in the Dow Jones industrial average during the half-day session couldn’t salvage the week.
And take a guess which commodity closed at yet another record high.
The Dow added 73.03 points, or 0.6%, to 11,288.54, but lost 0.5% for the holiday-shortened week and stayed in bear-market territory, off 20.3% from its October peak.
 The broader market was much worse, for the day and the week. Investors continued to unload some of the stocks that held up best for them in the second quarter, particularly smaller issues. The Russell 2,000 small-stock index lost 1% today and 4.6% for the week, and is down 22.2% from its all-time high reached nearly a year ago.
The slow-motion crash in bank stocks also continued, suggesting no easing of the latest jitters over the financial system. On the new-lows list today yet again: Bank of America, Wachovia, Comerica, U.S. Bancorp and Zions Bancorp, among others.
The government’s report of a net loss of 62,000 jobs in the economy in June nearly matched expectations, so that was a relief to some on Wall Street.
Should it have been? The debate over whether we are, or aren’t, actually in a recession will go on, but to some analysts there’s no question anymore.
Merrill Lynch & Co.’s econo-bear, David Rosenberg, says the lesson from history is that "you don't have six consecutive monthly declines in payrolls and not be in an outright recession."
For stock investors, the issue is what the slowdown/recession/whatever will mean for corporate earnings. Analysts have a dismal view of results for the quarter just ended: Operating earnings of the S&P 500 companies are expected to be down 12.4% from a year earlier, according to Wall Street estimates tracked by Thomson Reuters.
Yet those same analysts still believe the second half will bring a big turnaround. They’re expecting a 12.7% year-over-year gain in S&P earnings in the third quarter. . . .
Read on »
Thursday is looking like a big mess for financial markets. And since everybody's bracing for trouble, maybe we won't get it, and investors can limp off to their July 4th barbecues without much additional damage to their portfolios or their psyches.
Maybe.
In any case, it'll be a short day for Wall Street ahead of the Friday holiday: Stock markets will close three hours early, at 10 a.m. PDT, because who needs an extended holiday weekend more than the New York Stock Exchange's overworked mainframe computer?
Here's what on tap today:
--Pared payrolls: The government will release its June employment report at 5:30 a.m. PDT. The consensus expectation is that the economy lost a net 60,000 jobs last month, according to Bloomberg's regular survey of about 80 economists. That would make it a sixth straight month of job losses.
A much bigger number could fan the belief that a recession is underway, which would hardly be a confidence-builder for the stock market, fresh into an official bear market Wednesday on the Dow index and the Nasdaq.
 What's scary is that, if we're about to fall into recession, we aren't even close to the level of payroll cuts in previous downturns. The economy lost an average of 65,000 jobs a month from January through May. That was just about one-third the 181,000-a-month average of the last recession (March-November 2001).
--Euro rate hike: Jean-Claude Trichet, head of the European Central Bank, has been threatening for months to raise interest rates to fight inflation -- because, hey, that's what central bankers are supposed to do, oui? At their meeting today ECB policymakers are almost certain to make good on that threat, lifting their key rate from 4% to 4.25%.
Not a big deal? Tell that to the dollar, which is nearing a new low against the euro. The European currency jumped to $1.589 on Wednesday from $1.579 on Tuesday. Its record high was $1.599 on April 22.
The Federal Reserve's key rate is 2%. Higher rates in Europe give the continent an edge in attracting capital. That underpins the euro.
And what happens as the buck weakens? Commodity exporters, who price their stuff in dollars worldwide, earn less. We just hand them another reason to keep prices of raw materials, including (especially?) oil, on the rise.
So let's get out there and enjoy the weekend, before the next $10-a-barrel jump in crude.
Photo: A wag of my finger to you, Monsieur Bernanke! Jean-Claude Trichet. Pier Paolo Cito/Associated Press
No more waiting: We’re now in a genuine bear market for the Dow Jones industrials and, for the second time this year, for the Nasdaq composite.
Zapped by another jump in oil prices, the Dow closed today at 11,215.51, down 166.75 points, or 1.5%. That left the blue-chip index off 20.8% from its record closing high of 14,164.53 reached on Oct. 9.
 The tech-heavy Nasdaq slid 53.51 points, or 2.3%, to 2,251.46, leaving it down 21.2% from its 2007 peak. The Nasdaq already had visited bear territory briefly in March, when it was off as much as 24% from its high before rebounding.
A drop of at least 20% is considered the threshold for a bear market. Many other broad-market indexes haven’t yet joined the bear fest, but they’re all close. "I'd say it's only a matter of time," said Art Hogan, veteran market analyst at Jefferies & Co. in Boston.
The Dow’s slide under the 20% threshold wasn’t a shock, given that the index has been battling to stay above it for days. But this still is a bell-ringer for investors, Hogan says. The last broad-based bear market on Wall Street was in 2000-02.
Crossing the 20%-loss line "says the market is struggling, and it’s struggling for some very credible reasons," he says.
The catalysts for today’s sell-off: the usual suspects, and a few more.
Oil rose to a fresh record high, nearing $144 a barrel. And just to stick the inflation knife deeper into financial markets, copper, too, surged to a record because of miners’ strikes in Peru. (Here's your bull market: The CRB index of 19 major commodities now is up 32% year to date.)
Meanwhile, the dollar slumped, an index of home builders’ stocks fell through its previous 2008 low, and General Motors’ shares dived 15% to a new 54-year low of $9.98 after a Merrill Lynch analyst warned that bankruptcy was "not impossible" for GM.
All of this is leading up to another potentially big day for markets on Thursday, when the government reports on June employment trends (a net loss of 60,000 jobs is expected) and the European Central Bank is expected to raise its benchmark short-term interest rate for the first time in a year, citing inflation. The ECB’s move could slam the dollar once again -- if currency traders didn’t get most of that out of their systems today.
Oh, and U.S. investors and traders will have to cram their responses to the jobs report and the ECB into a half day, because markets will close at 10 a.m. PDT in advance of the Fourth of July holiday. That could just stoke the volatility meter tomorrow.
Who’s ready for a long weekend?
Photo: Oh sure, they look cuddly enough when they're young. Don't be fooled. Polar bear cub Flocke at the Nuremberg zoo. TImm Schamberger/AFP-Getty Images
From Times Staff Writer Ken Bensinger, who covers the auto industry:
Is this how billionaires become millionaires?
With Ford Motor Co. shares today at their lowest level since the mid-1980s, billionaire L.A. investor Kirk Kerkorian’s decision to load up on the stock in the last few months now looks premature, at a minimum.
In late April, Ford reported a surprising first quarter profit, and confidence in the auto giant soared. Around that time, Kerkorian -- known for his, ahem, activist interest in more than one car company over the years -- announced that his Tracinda Corp. investment firm had acquired 100 million Ford shares, or a 4.7% stake, at an average price of $6.91.
 On April 28, Kerkorian stepped up again, making a tender offer to buy an additional 20 million Ford shares for $8.50 each -- a 13% premium over the market price.
Wall Street was, briefly, jubilant. The Wall Street Journal, talking of revivals at privately held Chrysler as well as at Ford, wrote: "The turnaround efforts at both companies . . . still have a long way to go. But the bottom line is that Ford appears to have pulled ahead. Mr. Kerkorian's latest automotive investment is best viewed as proof of that."
Whoops. On May 22 Ford announced that its long-stated goal of profitability in 2009 had gone up in smoke. Instead, it was cutting production, idling shifts at plants and delaying delivery of its big 2009 model launch, the redesigned F-150 pickup.
The stock, already on a downswing after reaching $8.48 on May 1, sank to $7.16 on May 22, and kept sliding from there. By June 9 -- the day Kerkorian set to complete the tender offer -- the shares were trading for $6.36.
Nonetheless, Kerkorian made good on the offer for 20 million shares at $8.50 each, even though he had the option of pulling out because the market price had tumbled.
And still, he wanted more: On June 19 Kerkorian disclosed that he had purchased an additional 20.8 million shares of Ford on the open market at prices between $6.10 and $6.75, raising his stake to 6.5%. That week, the 91-year-old investor met with Ford leadership, including Chief Executive Alan Mulally, in L.A.
Which brings us to Ford’s report today on its June sales. They were dismal, off 28% from a year earlier. Worse than General Motors’ sales, even. Investors hammered Ford’s stock as low as $4.41. The shares ended at $4.71, off 10 cents for the day and the lowest since 1985.
All told, Kerkorian now has 140.8 million Ford shares worth $663 million. That means he’s down at least $325 million, or almost 33%, on his investment. (A Tracinda spokesperson couldn’t be reached for comment.)
But of course, it’s not a real loss unless you sell. And Kerkorian is nothing if not persistent when he gets involved with auto companies -- as he showed in his attempt to buy Chrysler in 1995 and his failed effort in 2005-06 to force GM into alliances with Renault and Nissan.
Photo: Kirk Kerkorian. Tim Shaffer / Reuters
Bill Strazzullo had warned his clients against chasing any rally that might follow the Federal Reserve’s unprecedented steps to prop up the financial system in mid-March.
The veteran trader, a partner at the small financial advisory firm of Bell Curve Trading in Freehold, N.J., told me on March 21 that he was sure the credit crunch wasn’t over and that its effects on the economy were just beginning.
It looks like Strazzullo got it right. Bank and brokerage stocks are in meltdown mode again this month, and they led the plunge in the market on Thursday that slashed 358 points off the Dow industrials and left the index at its lowest since September 2006.
So, what now, Bill? He told me Thursday that he’s still longer-term bearish. But in the near term he thinks that this market sell-off could be reaching a crescendo. "I don’t want to be an aggressive seller here," he said.
 He’s advising his clients with short sales (bets on lower prices) to take some of their profits, particularly in battered financial issues.
Some of the selling this week could be tied to end-of-quarter portfolio shifts by nervous investors. With the turn of the calendar page on Tuesday, that kind of selling pressure would end.
Still, Strazzullo doubts that the market is going to turn sharply higher anytime soon, even if it gets a dose of good news. For one thing, he notes that many investors who bought into the spring bounce -- and now are underwater -- may be eager to exit at the first uptick in prices. Once bitten, twice shy, after all.
It’s the fundamentals that really worry him, though. He sees the American consumer as severely strapped financially, a view that was validated by the latest consumer confidence report this week.
"Consumers have never been this insecure," Strazzullo said.
That may not be a novel thought, but I think it’s one that more people on Wall Street are just beginning to ponder.
As for new help for the economy or the markets from Congress or the Federal Reserve, "there are no more rabbits to pull out of the hat," Strazzullo said, echoing what even many market bulls will concede.
The tax rebate checks are spent. And the Fed is boxed in on interest rates: It doesn’t want to cut its key rate further, from the current 2%, because of inflation pressures and because policymakers know that another cut could devastate the dollar all over again.
Something else came to light on Thursday that I didn’t discuss with Strazzullo, but left me a little chilled: reports that the Fed is talking about loosening restrictions on private-equity firms that want to invest in banks.
Why do that? Obviously, because many loss-ridden banks, large and small, are desperate for capital to bolster their balance sheets.
Anything that helps keep the financial system from crumbling ought to be welcomed, you’d suppose. But remember: When the Fed began doling out hefty new loans to cash-strapped banks and (for the first time) brokerages in March, Wall Street figured, "Mission accomplished!"
Evidently not.
It isn’t often that a CEO can lament that his company’s stock price is lower than it was before he was born.
Could that soon be Rick Wagoner’s fate at General Motors Corp.?
 The auto giant’s shares traded as low as $11.21 early today, which by Reuters’ reckoning was the lowest since 1955.
Wagoner was born in 1953. So the trend here doesn’t look good for him.
But it isn’t clear to me that the Reuters calculation adjusts for GM stock splits that occurred in 1950 and 1955 (according to Standard & Poor’s). As you might imagine, 50-year-old stock data isn’t easy to come by.
UPDATE: GM today closed down $1.38 to $11.43, a price level the stock last saw late in 1974, according to research firm Global Financial Data in L.A. Before that, you do indeed have to go back to 1954-55 to find GM at this price -- and that includes the adjustment for stock splits and spinoffs, Global Financial Data says.
Investors bailed out of GM today for the eighth time in nine sessions after Goldman Sachs & Co. downgraded the stock to "sell" from "hold." Goldman said it expected GM to burn through so much cash this year and next that the company probably would have to raise fresh capital, "which we believe could lead to significant shareholder dilution and/or a cut to the company’s dividend."
The stock has plunged 54% year to date, and is one of the big reasons why the Dow Jones industrial average is having such a miserable June.
Among the major brokerages, Goldman is alone with its "sell" rating on GM, according to Bloomberg’s tally of analyst recommendations. Merrill Lynch & Co. has a "buy" on the stock, Lehman Bros. rates it "hold" and Citigroup also gives it a "hold," says Bloomberg.
They’re riding this SUV right over the cliff.
Photo: GM CEO Rick Wagoner. Paul Sancya/Associated Press
Bad as it feels today in the stock market, it’s not yet as grim a situation as Wall Street faced in mid-March -- at least, if you use any major index but the Dow Jones industrials as your yardstick.
I’m not trying to minimize the situation, just point out some facts, such as they are.
The Dow now has plunged through its March 10 closing low of 11,740.15, and was down 254.11 points, or 2.2%, to 11,557.72 at about 10:45 a.m. PDT. Blame the usual suspects: Another rise in oil prices, another drop in the dollar, and another batch of investors too depressed to keep holding GM, Citigroup, Boeing, etc.
But the Standard & Poor’s 500, down 2.2% to 1,292.36, would have to lose another 1.5% to take out its March 10 closing low of 1,273.37.
Some broader indexes have even larger cushions, relatively speaking. The New York Stock Exchange composite index, off 2.2% to 8,674.82, would have to drop another 2.1% to blow through its March low. And the technology-dominated Nasdaq composite would have to slump nearly 7% from its current level to hit a new low.
What’s more, even with this latest selloff, the Dow still isn’t in bear-market territory as it’s usually defined -- meaning a drop of at least 20% from the recent high.
The Dow is off 18.4% from its all-time closing high of 14,164.53 reached on Oct. 9, 2007. Measured from their respective highs last year, the S&P 500 is down 17.4% and the Nasdaq is down 18.4%.
So by Wall Street’s usual standards, we’re still just in a "correction" within a bull market.
Do you feel better yet?
"Techically it’s not a bear market, but that’s semantics," concedes Paul Hickey, co-founder of research firm Bespoke Investment Group in Harrison, N.Y. For most investors, he says, "It doesn’t feel like a bull market."
Even so, he says that the overall reading he gets from 35 market indicators Bespoke tracks is that the stocks are "deeply oversold right now" after four straight weeks of losses, meaning the market is more likely to bounce higher -- at least in the near term --- than keep sinking like a stone.
A few notes from around the markets today:
-- As Federal Reserve meeting days go, this one was fairly uneventful for markets. Blue-chip stocks finished modestly higher and Treasury bond yields were mixed after the Fed, as expected, kept its key short-term rate at 2%. It was the first Fed meeting without a change in rates since August.
The central bank suggested in its post-meeting statement that the economy wasn't in such bad shape after all. "Although downside risks to growth remain, they appear to have diminished somewhat," the Fed said -- obviously discounting the abysmal consumer confidence survey results reported Tuesday.
-- "Inflation has been slightly higher than expected and there are prospects that inflation will move up further," the central banker said. "We give weight to preventing the higher rate of inflation from becoming entrenched."
 The Fed's Ben S. Bernanke? No, that was the Norwegian central bank's deputy governor, Jan F. Qvigstad, in a statement today after the Norges Bank raised its benchmark interest rate to 5.75% from 5.5%.
Bernanke & Co. continue to talk a good game about inflation concerns, but other central banks are taking action by tightening credit, the usual step to show you're serious about damping price pressures. Norway's rate hike followed similar moves recently by China, Mexico, Turkey, Brazil, India and South Africa.
Who cares what other central banks do? The dollar does. It slid today against many other currencies after the Fed's statement. (There go your hopes for that Oslo pub-crawl tour.)
It was just a few weeks ago that Bernanke strongly signaled the need for a rebound in the dollar to combat rising prices of imports, including oil. Yet there was no mention of the greenback in today's Fed statement, notes Joe Battipaglia, chief investment officer at brokerage Stifel, Nicolaus & Co. in Florham Park, N.J.
Never mind, Dr. Bernanke?
-- The Fed's relatively upbeat take on the economy must not have been persuasive to investors in financial-company shares, which have been battered by expectations of mounting loan losses. The BKX index of 24 major bank stocks jumped as high as 65.44 early in the session, a 4.9% leap from Tuesday's finish. But the index gave almost all of that back by the closing bell, ending at 62.62, up just 0.4% for the day.
That's still above the 10-year closing low of 60.87 reached Monday. But as Jay Shartsis, head of options trading at RF Lafferty & Co. in New York, reminds: "Every time the financial stocks look like they can't possibly go any lower, they go lower."
The BKX is down 29% year to date, compared with a 10% drop in the Standard & Poor's 500 index.
California and Illinois both filed suit against Countrywide Financial Corp. today, alleging deceptive business practices in the mortgage giant’s lending operations in the last few years.
These cases are likely to be the first of a flood of state suits against Countrywide (soon to be a unit of Bank of America Corp.) for its role in the mortgage boom and bust. But the end result of the legal pile-on is far from clear -- in particular, whether the states’ cases will mean even a penny of help for borrowers who were, in fact, victims.
And how to separate the victims from the greedy borrowers who knew all too well that they were taking out loans they couldn’t afford?
In any case, the California and Illinois allegations will resonate with many people who did business with Countrywide (and with plenty of other lenders in the boom years). They’ll also resonate with people who were responsible borrowers and who were aggravated by Countrywide’s nonstop mail solicitations begging them to borrow more money. Yes, this is America, and you're allowed to market your business. But it's one thing to hawk, say, cable TV services; it's another to help load a family with so much debt that it ruins their lives.
 Here are some of the highlights of the California complaint against Countrywide, Chief Executive Angelo Mozilo and President David Sambol (none of whom is commenting). Note the generic nature of these allegations. This case could really use some meat on these bones:
-- "Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers’ long-term ability to afford them and to sustain homeownership. This scheme was created and maintained with the knowledge, approval and ratification of defendants Mozilo and Sambol.
-- "To further the deceptive scheme, defendants created a high-pressure sales environment that propelled its branch managers and loan officers to meet high production goals and close as many loans as they could without regard to borrower ability to repay.
-- "Countrywide received numerous complaints from borrowers claiming that they did not understand their loan terms. Despite these complaints, defendants turned a blind eye to the ongoing deceptive practices engaged in by Countrywide’s loan officers and loan broker ‘business partners,’ as well as to the hardships created for borrowers by its loose underwriting practices.
-- In the case of home-equity lines of credit, or HELOCs, "Countrywide typically urged borrowers to draw down the full line of credit when HELOCs initially funded. This allowed Countrywide to earn as much interest as possible on the HELOCs it kept in its portfolio. For the borrower, however, drawing down the full line of credit at funding meant that there effectively was no ‘equity line’ available during the draw period, as the borrower would be making interest-only payments for five years.
-- "Underwriters were under intense pressure to process and fund as many loans as possible. They were expected to process 60 to 70 loans per day, making careful consideration of borrowers’ financial circumstances and the suitability of the loan product for them nearly impossible.
-- "Because of the intense pressure to produce loans, underwriters increasingly had to justify why they were not approving a loan or granting an exception for unmet underwriting criteria to their supervisors, as well as to dissatisfied loan officers and branch managers who earned commissions based on loan volumes.
-- "Countrywide’s high-pressure sales environment and compensation system encouraged serial refinancing of Countrywide loans. The retail compensation systems created incentives for loan officers to churn the loans of borrowers to whom they had previously sold loans, without regard to a borrower’s ability to repay, and with the consequence of draining equity from borrowers’ homes."
Photo: Countrywide CEO Angelo Mozilo. Credit: Ric Francis / Associated Press
Like a hypnotherapist, the Federal Reserve keeps trying to talk us into an economic recovery.
"You will not need lower interest rates to feel better," Chairman Ben S. Bernanke tell us in so many words -- something he and his fellow Fedsters are likely to repeat again today as they gather and, almost certainly, hold their benchmark rate at the current 2%.
But the latest survey of consumer confidence shows that the Fed's relatively hopeful message isn't registering. Americans feel downright terrible about the economy as it is, and their expectations for the near future are even more depressed, according to the Conference Board's June consumer confidence report, issued Tuesday.
The overall confidence index, derived from questionnaires sent to 5,000 families, fell to 50.4 this month, down from 58.1 in May and the lowest since 1992.
 Worse, the expectations index in the survey -- how people figure things will look in six months -- dropped literally off the chart, to 41.0. That was the lowest figure in the 40 years of the survey, and broke through the previous low of 45.2 reached in December 1973 -- just as the economy was beginning to plunge into recession from the effects of the surge in oil prices that followed the Arab embargo announced that fall.
But something else in the latest survey really disturbed Lynn Franco, director of the Conference Board's consumer research center in New York, she tells me: The percentage of people who expect their income to drop in the next six months jumped to a record 15.9%. Even in December 1973, when consumers' overall expectations for the economy were dismal, only 10.8% expected their income to decline in the following six months.
Just 12.3% of consumers are expecting a rise in income over the next six months, compared with 19.4% a year ago.
It's true that consumer spending hasn't collapsed in recent months, thanks in large part to the federal tax rebate checks most families received. But once that money is gone, how do you have a consumer-led economic recovery in the second half with so many people feeling so bad about the big picture and about their personal financial situations?
Would lower interest rates help at this point? Maybe not. But in times of serious trouble it's always better for the Fed to have more bullets in the gun than fewer -- and right now, with its key rate at 2%, there aren't many bullets left.
What's more, with energy and food price inflation showing no signs of abating, Bernanke and other Fed officials have been talking in recent weeks about the need to begin raising interest rates as early as this fall to beat back price pressures.
Hike rates on consumers who are struggling to fill their gas tanks and have enough cash left over for groceries? It's true that quite a few other central banks around the world already have taken that unpopular policy route this year. But they're operating in economies that, for the most part, still are growing at a healthy pace.
The U.S. economy, by contrast, may not officially be in recession, but as Franco put it, never mind the terminology -- "to the consumer right now it feels like a recession."
Photo: And they thought they had it bad! President Nixon, right, listens to his energy policy advisor, John A. Love, in November 1973, one month after the Arab oil embargo was announced. Credit: John Duricka / Associated Press
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