Stocks hit multi-year lows on continued worries about the economy and the state of the auto sector. The Dow ($INDU) fell 427.47 points Wednesday, or 5.07 percent, to close the session at 7,997.28. The S&P 500 ($SPX) lost 52.54 points, or 6.12 percent, to 806.58. The Nasdaq ($COMPQ) gave up 96.85 points, or 6.53 percent, to 1,386.42. Volume was moderate on the session with 1.63 billion shares traded on the NYSE and 2.39 billion shares changing hands on the Naz. Market breadth was sharply negative by a 2-to-30 and 3-to-26 margin on the Big Board and Naz respectively.

The Dow didn’t penetrate its Oct. 10 low on an intraday basis, but did close at more than a five year closing low. However, the SPX and Naz both moved through support. Auto stocks fell once again on the view a bailout package might not be forthcoming for the beleaguered sector, but it was the financial sector that continued to be the hardest hit. Economic news was disappointing and the Big Three’s attempt to talk the government into a bridge loan on the Hill didn’t provide any help.

Shares of Ford (F) and General Motors (GM) continued to slide Wednesday, down 25.0 percent and 9.7 percent respectively. The companies are looking for a bridge loan to help get them through these tough times. GM’s CEO Rick Wagoner told legislators that the collapse of the U.S. auto industry could mean the loss of up to 3 million jobs. Some sort of aid is expected to passed for the industry, but most likely not until after the beginning of 2009. In the past year, GM shares have lost more than 90 percent of their value with Ford closing at $1.26 with a 52-week high at $8.79.

Shares of Citigroup (C) saw their largest one day decline since the crash in October 1987. The financial giant fell 23.46 percent on the session, closing at $6.40, which is a 13-year low. Earlier this week, the company announced it would cut more than 50,000 jobs in order to lower costs. However, now traders are starting to wonder if things are even worse at the company than management let on. Dow components Bank of America (BAC) and JPMorgan (JPM) also tumbled, down 14.03 percent and 11.42 percent respectively.

In economic news, housing starts fell 4.5 percent in October to a level of 0.791 million annualized units. However, this was slightly better than expectations, though the year on year declines sits at a drop of 38.0 percent. Building permits fell 12.0 percent and are down 40.1 percent this past year. This points to even further weakness for starts in the months to come. In related news, mortgage applications fell 12 percent for the week ending Nov. 14.

Thursday’s session could be crucial for both the bears and the bulls. The fact that buying didn’t come in when the lows were tested is a bearish sign and the bulls need to find strength tomorrow or new support will need to be found.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site