Fate of automakers looms over Wall Street

updated 8:17 p.m. ET Dec. 7, 2008

NEW YORK - Wall Street heads into another turbulent week on Monday, with Congress still hammering out a bailout for automakers and investors having to digest more data expected to show the economic malaise deepening.

Investors received no respite to worries about the economy over the weekend, with President-elect Barack Obama declaring on Sunday that the situation is destined to get worse before it gets better. Major U.S. stock indexes fell last week after a series of economic reports left little indication that the recession is easing.

Chief among investors’ economic worries during the next few days will be the fate of Ford Motor Co., General Motors Corp., and Chrysler LLC. The three automakers are seeking $15 billion in short-term aid from Washington to stave off bankruptcies that would lead to a flood of job losses.

Obtaining the aid might come in exchange for the heads of the companies’ top executives. Sen. Chris Dodd, a Democrat who chairs the Senate Banking Committee, said Sunday that Rick Wagoner, GM’s chief executive, “has to move on.” He also said Chrysler should give up its independence and be acquired by another company.

But the negative news facing Wall Street might not actually send stocks plunging this week. There’s a growing sense among many investors that disappointing corporate reports and economic data might give the government incentive to pass a bailout for Detroit, and also lead to lower interest rates and even a new stimulus package.

Thomas J. Lee, equities analyst at JPMorgan, said Wall Street has already factored in much of the negative news about the faltering economy and sluggish corporate profit growth. On Friday, the Dow Jones industrial average gained 259 points despite a Labor Department report that showed the nation lost more than a half a million jobs last month.

“You’re not going to have another big jobs report until January,” Lee said, noting that Friday’s jobs report was the big piece of data for the month. “Everything now is more or less confirming what we already know.”

Economy in Turmoil Jobless rate rises to 26-year high Out-of-work with no place to land, the legions of America's unemployed are growing. The nation's unemployment rate rose to 9.5 percent in June, a 26-year high. Factory orders rise more than expected in May Calif., other states face tough budget choices Pending home sales climb in May Manufacturing report boosts economic hope

There will be no shortage of data this week. The Labor Department will issue its weekly report on unemployment on Thursday, with the number of first-time claims likely to be above 500,000 for a fourth-straight week.

The Commerce Department will follow on Friday with its report on retail sales, a closely watched gauge considering that consumer spending drives more than two-thirds of the U.S. economy. The government is expected to report that sales fell in November for a fifth-straight month, despite a surge of shoppers over the Thanksgiving weekend.

Other economic reports include the University of Michigan’s consumer sentiment index and the Labor Department’s Producer Price Index.  

The market has been able to claim a victory of sorts when it comes to absorbing negative economic news. Except for a 680-point drop in the Dow last Monday, stocks have repeatedly been able to overcome bleak economic data and corporate announcements.

MORE FROM TECHNOLOGY & MONEY

Technology & Money Section Front

Gallery: Your latest splurges Facebook: ‘Why not give your ex another shot?’ Is Twitter the news outlet for the 21st century?   Advice on mortgage payments Get your ‘Thriller’ on YouTube   Stolen items up for grabs allDAY: Which TODAY anchor do you follow on Twitter?   What are your mileage points worth? Spears, DeGeneres Twitpic accounts hacked   Texting while driving worse than DUI? Technology & Money Section Front   Add Technology & Money headlines to your news reader: