`They call it stormy Monday,” bluesman T-Bone Walker used to sing.
The treasury-bond market was closed for Columbus Day, and stock trading volume was modest–but that doesn’t mean things were quiet Monday on Wall Street. A major bankruptcy and a separate accounting irregularities disclosure combined to put a big chill on the automotive sector.
What’s more, the start of what promises to become a major scandal at New York derivatives-broker Refco Inc. (one of the Chicago Mercantile Exchange’s biggest customers), dragged Refco’s formerly highflying shares down by nearly half.
Hurt by those nervous-making developments, the Dow Jones industrial average declined for a sixth consecutive session, finishing 53.55 points lower, or 0.52 percent, at 10,238.76.
In the first six trading days of October, the blue chips have surrendered 329.94 points, or 3.1 percent, and have descended to their lowest level since May.
After auto-supply giant Delphi Corp. resolved weeks of will-they-or-won’t-they speculation by filing for Chapter 11 bankruptcy protection over the weekend, shock waves rolled through Wall Street. As a result of Delphi’s move, General Motors Corp. may now face billions of dollars in Delphi-related obligations, and the automaker’s predicament sparked speculative whispers that GM might eventually opt to follow Delphi into bankruptcy.
GM’s already beaten-down shares tumbled 9.9 percent, to $25.48. And the shares of perhaps a dozen companies that supply GM with components, which are likely to suffer collateral damage as a result of their big customer’s travails, also took a hit:
– ArvinMeritor dropped 7.4 percent, to $14.28; Visteon declined 5.3 percent, to $8.53; Magna International slid 4.2 percent, to $66.56, BorgWarner shares fell 3.6 percent, to $54.27; and Lear slipped 3.4 percent, to a new 52-week low of $30.33. Goodyear Tire & Rubber shares dropped 8.1 percent, to $13.
– Then there’s Dana Corp. As a leading maker of auto components like axles and driveshafts, the Toledo, Ohio, company was clearly going to face selling pressure Monday morning. But Dana also had some news of its own: Citing “improper accounting,” the company warned it will restate the last six quarters’ earnings–and investors responded with a high-volume sell-off that sent Dana shares down 34 percent, to $6.04, their lowest level in at least five years.
Meanwhile, back in the financial sector, Refco Inc. unveiled some unsettling news of its own Monday.
Refco, which went public at $22 a share two months ago, said it had asked CEO Phillip Bennett to take a leave of absence, after an internal review found the executive (and major stockholder) had secretly transferred $430 million of the company’s assets to a company he controls. Recent financial statements shouldn’t be trusted, the company said. Refco shares nose-dived 45 percent, to close at $15.60.
Not all the news was depressing. Jefferson Pilot shares climbed 6 percent, to $53.81, after the insurance concern agreed to a $7.5 billion buyout bid from industry rival Lincoln National.
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The other major stock indices declined along with the Dow, even though oil prices eased fractionally. The Standard & Poor’s 500 index fell 8.57, or 0.72 percent, to 1187.33. And the tech-heavy Nasdaq composite index was off 11.43, or 0.55 percent, at 2078.92. The Russell 2000 index of smaller companies, which has been under particular pressure of late by the decline of energy-sector stocks, fell 6.36, or 1 percent, to close at 637.97.
Local stocks: Shares of Rosemont-based information-technology services provider Kanbay Ltd. surged by as much as 8.8 percent in early Nasdaq trading, then cooled along with the broader market to close up 4 percent, at $19.90.
– Bally Total Fitness shares rose 9 percent, to a 52-week high of $5.35. The fitness center operator’s shares traded above $20 as recently as mid-2002 but have been under pressure in recent years. The Chicago company didn’t release any news Monday.
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