Autos Worry Wall Street

Investors clear out of stocks after government rejects viability plans from GM, Chrysler.

With the U.S. automotive and banking sectors in turmoil and first-quarter earnings season looming, investors were defensive Monday and sent Wall Street stocks sharply lower.

President Barack Obama's auto task force gave failing grades to restructuring proposals from General Motors (nyse: GM - news -people ) and Chrysler, and set deadlines for the pair to come up with revised plans to stay out of bankruptcy. GM will get 60 days of working capital, but Chief Executive Rick Wagoner was forced out and the company will need further concessions from bondholders and unions. (See "Obama Takes The Wheel In Detroit.")

Chrysler was given 30 days to nail down its partnership agreement withFiat (nyse: FIA - news - people ). It announced it had reached "framework" for a deal with the Italian carmaker just a few hours after President Obama's news conference discussing the administration's stance. Chief Executive Bob Nardelli acknowledged that significant hurdles remain. (See "Chrysler, Fiat Under Pressure To Wed.")

GM shares lost 91 cents, or 25.1%, to $2.71, and other auto-related stocks were also caught up in the slide. Rival Ford Motor (nyse: F - news - people ) slipped 16 cents, or 5.6%, to $2.68; while dealership chain AutoNation (nyse: AN - news -people ) slumped 70 cents, or 4.9%, to $13.59; and parts supplier American Axle & Manufacturing Holdings (nyse:AXL - news - people ) dropped 37 cents, or 21.0%, to $1.39.

The Standard & Poor's 500 sank 34 points, or 4.1%, to 782; the Dow Jones industrial average fell 312 points, or 4.0%, to 7,464; and the Nasdaq lost 55 points, or 3.6%, to 1,490. Bond prices were higher, with the yields on Treasury notes dropping, as investors sought the safety of government debt. The benchmark 10-year note yield fell to 2.72% from 2.76%. Meanwhile, the Federal Reserve drew strong interest again in its latest purchase of Treasuries.

In the banking sector, firms continue to sell assets in the interest of boosting capital ratios. Fifth Third Bancorp(nasdaq: FITB - news - people ) said it will spin out its payment-processing business into a joint venture. The Cincinnati-based bank will sell a 51.0% stake in the unit to buyout firm Advent International for $561.0 million. Shares of Fifth Third managed a gain of 13 cents, or 5.5%, to $2.48.

Bank of America (nyse: BAC - news - people ) could sell part of its 16.6% stake in China Construction Bank, according to reports Monday. Zhang Jianguo, president of the Chinese bank, said it would be reasonable for BofA to maintain about a 10.0% stake in the firm. BofA shares lost $1.24, or 16.9%, to $6.10.