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Stocks drop on gloomy ratings outlook for GE

Associated Press

Wall Street extended its losses Thursday as a negative ratings outlook on financial and industrial powerhouse General Electric Co. shook an already fragile investor psyche.

After moving within a narrow trading range for much of the session, the Dow Jones industrial average dropped about 220 points, or about 2.5%. The broader Standard & Poor’s 500 index lost more than 2%.

Stocks struggled to find a direction in the early going as investors sifted through a number of varying signs about the economy, including more layoffs and dismal earnings forecasts.

But a negative outlook from Standard & Poor’s on GE added pressure on the market.

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S&P; lowered its outlook to negative from stable for GE and its GE Capital finance arm. The service affirmed GE’s and GE Capital’s Triple-A ratings, but said there was a 33% chance they could lose them because of the ongoing financial struggles at GE Capital.

GE shares fell $1.43, or 8.2%, to $15.96.

At the same time, energy stocks tumbled as oil prices plunged. Crude dropped below $37 a barrel Thursday on worries of a drastic pullback in energy spending, even after a record production cut from OPEC this week.

Oil prices have been on a downward march since reaching a high of near $150 a barrel in July.

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“The fear is that if oil does fall down to $25 or $30 a barrel, that could indicate that the economy is even weaker than market perception and that obviously is negative,” said Peter Cardillo, chief market economist for Avalon Partners.

Chevron Corp. fell $3.94, or 5.1%, to $72.88, while Exxon Mobil Corp. dropped $4.13, or 5.1%, to $76.93.

The expiration Friday of some options contracts for December added to the downward pressure, Cardillo said.

Meanwhile, auto stocks slumped as the White House continued to weigh a bailout for General Motors and Chrysler and news reports said lender GMAC’s Residential Capital mortgage unit may be considering filing for bankruptcy.

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GM fell 71 cents, or 16%, to $3.66. Ford slid 30 cents, or 9.6%, to $2.84. GM’s 85% plunge this year is the most among the 30 stocks in the Dow. Ford is off 58%. Chrysler is privately held.

Further weighing on the market were lackluster economic data and mixed corporate earnings reports.

The Dow fell 219.35 points, or 2.49%, to 8,604.99. The Standard & Poor’s 500 index fell 19.08 points, or 2.11%, to 885.34, while the Nasdaq composite index fell 26.94 points, or 1.71%, to 1,552.37.

The Russell 2000 index of smaller companies fell 7.42, or 1.52%, to 479.17.

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