Finance and Economic

Gasoline prices increased for the fourth day in a row Friday, according to a daily survey of gas station credit card swipes.

The price of regular unleaded rose 0.3 cents to a national average of $1.6730 a gallon from $1.67 on Thursday, according to motorist group AAA.

Average gas prices ticked higher on Saturday for the first time in nearly three months, according to AAA. They briefly retreated for one day before resuming their upward climb.

The price of gasoline has fallen in tandem with the price of crude oil, which has shed more than $100 a barrel since July. Oil demand has declined rapidly as the world economy has slowed.

According to the Transportation Department, Americans drove 100 billion fewer miles between November 2007 and October 2008, compared with a year earlier.

Local prices: Gas is currently selling below $2 a gallon in nearly all states, with the exception of Alaska, where gas prices averaged $2.648 a gallon, and Hawaii, where gas was $2.402 on average.

Gas was cheapest on average in Wyoming, at $1.477 a gallon, according to AAA. Missouri, the first state to see average prices drop below $1.50 a gallon, saw prices bounce back above that mark on Friday to $1.513.

Out of major U.S. cities, Anchorage, Alaska, has the highest average gas prices, at $2.404 a gallon, according to GasBuddy individual health insurance.com, a service that lets motorists post local fuel prices online. Salt Lake City, Utah, had the lowest average, at $1.383.

Diesel: The price of diesel fuel, which is used in most trucks and commercial vehicles, fell Friday by 1 cent to a national average of $2.519 a gallon, according to AAA.

Diesel prices have fallen more than $2 a gallon since hitting a record high of $4.845 on July 17.

Ethanol: The price of E85, an 85% ethanol blend made primarily from corn, fell by nearly a penny to an average of $1.499 a gallon in Friday’s survey, according to AAA.

E85 can be used in place of regular gas in specially configured "flex-fuel" vehicles, but it is not readily available in some states.

The AAA figures are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. GasBuddy prices are averages of local regular unleaded gasoline prices that about 700,000 volunteer gas prices spotters have posted online. Individual drivers may see lower fuel prices in different areas of each state.

CNNMoney.com staff writer Kenneth Musante contributed to this report.  

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U.S. stocks fell Monday, wiping out last week’s gains, after manufacturing showed a worsening economy that may hurt earnings at companies, including JPMorgan Chase & Co. and Apple Inc.

JPMorgan tumbled 7.5 percent on Merrill Lynch & Co.’s prediction that the biggest U.S. bank by assets may post a quarterly loss, while Apple slid 3.6 percent after the maker of iPods was downgraded to neutral at Goldman Sachs Group Inc.

Ingersoll-Rand Co. and Textron Inc. lost more than 3.1 percent as industrial production decreased for the third time in four months and the New York Federal Reserve’s regional economic index contracted the most on record.

"There’s a lot of uncertainty right now as we start the week," said John Wilson, co-director of equity strategy at Memphis, Tenn.-based Morgan Keegan, which manages $120 billion. "Right now, the concern is the depth and duration of the recession that we’re in."

The Standard & Poor’s 500 Index slipped 1.3 percent to 868.57 as financial and technology shares were the biggest drags on the gauge. The Dow Jones Industrial Average declined 65.15 points, or 0.8 percent, to 8,564.53. The Russell 2000 Index of small U.S. companies decreased 3.4 percent.

The first simultaneous recessions in the U.S., Europe and Japan since World War II have dragged the S&P 500 down almost 45 percent since its October 2007 record.

Apple slid $3.52 to $94.75 after being cut from buy at Goldman Sachs on concern that consumer spending will weaken further. David Bailey reduced his 12-month share-price estimate to $115 from $125 500 fast cash payday loan.

JPMorgan fell $2.31 to $28.63. The stock was cut to underperform from neutral at Merrill Lynch, which said it is increasingly clear that credit costs in the U.S. will get much worse. Merrill also slashed JPMorgan’s share-price target by 39 percent to $27. Merrill’s Guy Moszkowski is the only analyst tracked by Bloomberg to rate JPMorgan the equivalent of sell.

Financial companies in the S&P 500 lost 4 percent as a group, while computer-related shares retreated 1.7 percent.

Morgan Stanley and Goldman Sachs, which report earnings this week, both retreated. The firms, which have each lost more than 69 percent this year, probably will report fourth-quarter losses on shrinking asset values and a decline in fees for businesses such as merger advice, trading and money management, according to the average estimate of analysts surveyed by Bloomberg.

Morgan Stanley declined 1.5 percent to $13.64 after Deutsche Bank AG analyst Michael Mayo said earnings per share will drop 59 percent in 2009 as revenue declines to the same level as 2005.

Goldman Sachs fell 1.9 percent to $66.46. Bank of America Corp. slid 5.5 percent to $14.11, and Wachovia Corp. lost 3.4 percent to $5.11.

Telephone companies in the S&P 500 slid 3.1 percent as a group after AT&T Inc., the biggest U.S. phone company, was downgraded to neutral from buy at Goldman Sachs, which noted that the economic slowdown led to a drop in its employee pension fund. AT&T shares lost 3.7 percent to $27.13.

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The devastating economic malaise gripping the United States has finally infected Canada’s job market, which shed nearly 71,000 positions in November, the largest monthly net loss in 26 years.

The higher-than-expected job losses pushed the country’s unemployment rate to 6.3 per cent, up one-tenth of a percentage point from October.

"If you needed one piece of evidence to prove that Canada has finally entered that slippery slope toward recession, this would be it," said Michael Gregory, a senior economist at BMO Capital Markets.

Canada posted a net gain of 133,000 jobs in the first 11 months of the year, compared with almost two million jobs lost in the United States over the period.

The picture was especially bleak in Ontario, Canada’s manufacturing heartland, where 66,000 jobs evaporated. Those losses drove the province’s unemployment rate to 7.1 per cent, up from 6.5 per cent the month before.

And this likely won’t be the end of gloomy unemployment reports. With Canada’s economy poised to contract, said CIBC World Markets economist Krishen Rangasamy, "things will certainly get worse before they get better." He sees the unemployment rate "creeping up steadily toward 7 per cent," with another 100,000 job losses expected over the next few months.

Manufacturing was hit particularly hard in November, with net job losses of 38,000. The sector has seen employment decline by 388,000 positions since a peak in 2002, Statistics Canada said.

In Ontario, where barely a day goes by without manufacturers announcing layoffs or plant closures, manufacturing job losses were even steeper, totalling 42,000 last month. That number is poised to rise after recent layoff announcements take effect, including 850 job cuts at two Magna auto-parts plants in the GTA, and 700 temporary layoffs announced yesterday at General Motors in Oshawa.

The dismal Ontario jobs picture "really is consistent with our thinking that Ontario is the epicentre of the impact of the U.S. slowdown in Canada," said Glen Hodgson, chief economist at the Conference Board of Canada.

Other sectors that are particularly vulnerable to U.S. fortunes, including transportation and warehousing, also showed substantial job losses, Gregory said payday loan online.

But the situation is even worse in the United States, which recorded 533,000 net job losses in November, the largest one-month decline since 1974. That pushed the U.S. unemployment rate up from 6.5 per cent to 6.7 per cent.

The Bank of Canada is expected to drop its key interest rate by half a percentage point to 1.75 per cent Tuesday as the outlook for Canada’s economy continues to weaken.

The feeble Canadian employment numbers prompted more calls for a government stimulus package, which likely will have to wait until the federal budget, which is slated for Jan. 27. Governor General Michaëlle Jean agreed to prorogue Parliament at the request of the Conservative government.

"We needed a massive stimulus package two months ago, not two months from now," said Jim Stanford, an economist with the Canadian Auto Workers union. "It’s absolutely jaw-dropping that Parliament has been closed down … when we should be moving dramatically to try to stop this crisis from getting worse."

At Queen’s Park, opposition parties said the huge jump in Ontario’s unemployment rate is proof that Premier Dalton McGuinty’s efforts to fight the economic downturn and retrain workers are a failure.

"Everyone could see this coming. Everyone knew this situation was going to get worse and worse," NDP Leader Howard Hampton said.

Economic Development Minister Michael Bryant acknowledged the jobless numbers were "brutal" but said Ontario’s effort at boosting the economy is "not intended to, nor can it, address the global economic crisis."

Hodgson said job losses in Canada probably won’t last as long as in the U.S. due to widely expected stimulus packages in both countries.

But, he said, "even with a big Obama package in the United States, the U.S. economy is going to have a really, really tough 2009. And if you’re sitting in Ontario, that translates into weak sales for whatever you do."

With files from Rob Ferguson

and the Star’s wire services

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European and Chinese industry activity slumped in November, Japanese officials said their economy was slowing rapidly and euro zone finance ministers gathered on Monday to discuss plans to curb recession.

The Bank of Japan called an emergency meeting for Tuesday to find ways to help corporate finance. BOJ Governor Masaaki Shirakawa warned access to funding was becoming increasingly tough for Japanese firms, to an extent comparable with a debilitating credit crunch a decade ago.

“Sluggishness in economic activity has increased rapidly. Overseas economies are experiencing the same kind of rapid change,” Shirakawa said of the broader Japanese economy.

Euro zone manufacturing activity sank to a record low in November and the outlook was equally grim.

The Markit Eurozone Purchasing Managers Index (PMI) for the manufacturing sector slumped to 35.6 in November, a low not seen in the survey’s 11-year history and way below the 50 mark that separates expansions from contraction.

“The extremely weak … survey intensifies fears that the euro zone’s recession will be deep and prolonged,” said Howard Archer, economist at IHS Global Insight.

The euro zone was officially declared in recession this month following a second quarterly contraction in economic output. Analysts do not see the economy growing again until the third quarter next year — and then only marginally.

The financial crisis that began with a U.S. housing market collapse last year has already knocked several big economies into recession, including the euro zone same day payday loans. Most economists believe the United States and Britain will soon follow.

Similar surveys from China showed its manufacturing industry slumped in November as new orders tumbled, showing the world’s fourth-largest economy being sucked deeper into the global maelstrom.

Japan’s economy minister was gloomier even than Shirakawa.

“We are moving to the next phase of shrinking consumption — some call it deflation — production going down and prices going down,” Economy Minister Kaoru Yosano told the Financial Times in an interview published on Monday.

RATE CUTS COMING

Central banks in Britain, the euro zone, Australia and New Zealand are expected to cut borrowing costs sharply this week in response to the crisis. Politicians are also poised to weigh in.

Euro zone finance ministers meet later on Monday to pick over a menu of economic measures drawn up by the European Commission, which could inject up to 200 billion euros ($258.8 billion) of government spending, although that figure includes national schemes already announced.

Agreement may prove elusive. German Chancellor Angela Merkel told her party on Monday the government, which has unveiled a 32 billion euro plan, would not take part in a “senseless” competition to spend billions more. 

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North American stock markets fell sharply again today as investor confidence was eroded by bad economic data and pessimism over the prospects of a U.S. bailout for the Big Three automakers.

Wall Street stocks were slammed the hardest, hitting levels not seen since 2003. In Toronto, all of the sectors were lower, led by diversified metals and financials stocks.

The main S&P/TSX composite index fell by 345.17 points to 8,490.56, a drop of nearly four per cent.

On Wall Street, the Dow Jones industrial average shifted down 427.47 points to 7,997.28. The Nasdaq composite index lost 6.5 per cent, or 96.85 points to 1,386.42 and the S&P 500 tumbled 52.54 to 806.58, the lowest close for that index since March 2003.

TSX financials stocks took a beating, down 4.9 per cent, after the Bank of Nova Scotia (TSX: BNS) warned Tuesday of a bigger-than-expected $595-million hit to its quarterly earnings caused by financial-market upheaval.

The other banks are expected to suffer similarly to Scotiabank when they issue their fourth-quarter results, starting next week. Scotia’s shares were down $1.93 to $35.24.

The Canadian dollar was at 79.83 cents US, down 1.48 cents, and the TSX Venture Exchange lost 20.16 points to 730.09.

Top Senate Democrats said today that Congress is unlikely to reach a quick bailout for the Big Three Detroit automakers, who are pleading for $25 billion in cash to stave off bankruptcy.

Congressional Democrats have proposed using part of the $700 billion financial bailout package to pump into the ailing auto industry, but the White House opposes such an approach.

Investors are concerned at the repercussions should any of the three automakers collapse, an event that could ripple through an already battered North American economy.

"There’s a general malaise among investors right now," said James Cox, managing partner of Harris Financial Group. "Everybody is in wait-and-see mode of what is going to happen with these big three automakers."

Bank of Canada governor Mark Carney strongly indicated today that the central bank will cut interest rates further next month in an effort to stimulate the economy. Carney told a luncheon in London that the economy is slowing more than previously thought, and inflation is less of a concern cash advance in one hour.

The TSX diversified metals sector slid 11.5 per cent, and Teck Cominco Ltd. (TSX: TCK.B) slid 15 per cent to $5.22.

Energy stocks were down 3.8 per cent as crude oil lost 77 cents to close at US$53.62 a barrel on the New York Mercantile Exchange.

The gold sector trekked 2.8 per cent lower as gold futures ended ahead for the first session this week on U.S. dollar weakness.

The December bullion contract closed up $3.30 to US$736 an ounce.

In economic news, Statistics Canada’s composite leading index – an indicator of future activity – fell 0.4 per cent in October. It was the biggest decline since the early-1990s recession, after a 0.3 per cent drop in September.

New American data showed deepening weakness. Construction of new homes plunged 4.5 per cent last month to the lowest level on government records. The Commerce Department said residential construction fell to an annualized rate of 791,000 units.

U.S. consumer prices, meanwhile, fell by the largest amount in records dating back to 1947, down one per cent last month as gasoline prices receded sharply. Core prices, excluding volatile food and energy costs, were down 0.1 per cent – the first decline in more than a quarter-century.

In earnings news, supermarket operator Metro Inc. (TSX: MRU.A) rang up $72.3 million in summer-quarter profit, up 25.5 per cent from year-ago earnings that were reduced by the integration of A&P stores. Sales were up 1.8 per cent from a year ago. Metro shares were at $33.

The Resolve Business Outsourcing Income Fund (TSX: RBO.UN) is suspending distributions to investors. The trusts units plunged 55 per cent, or $1.94, to $1.56.

Norsemont Mining Inc. (TSX: NOM) says its board has set up a special committee to deal with "recent unsolicited expressions of interest to acquire the company" and shares were ahead 15 per cent, or 25 cents, to $1.95.

Forestry company Tembec Inc. (TSX: TMB) fell to a quarterly loss of $4 million from year-earlier profit of $22 million, as sales declined to $629 million from $675 million. Shares dropped a penny to $1.56.

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General Motors Corp and Ford Motor Co posted more than $27 billion of net losses in the first half of 2008 — and that was before a deepening economic slowdown pushed industry sales beyond 15-year lows.

What either automaker will report for an encore in the third quarter could be overwhelmed by the potential merger of Chrysler LLC into GM or various other scenarios of some or all of the Auburn Hills, Michigan automaker being sold.

Both are expected to post dismal third-quarter results on Friday, capping off a disastrous week that started with reports that U.S. auto sales plunged to the lowest annualized rate in a quarter century in the first month of the fourth quarter.

Analysts on average expect GM and Ford to post losses of roughly $2 billion each for the third quarter excluding one time items, according to Reuters Estimates.

Cash flow remains key to investors, who saw GM stock fall to a 58-year low and Ford stock to a more than quarter century low in October, as does U.S. consumer confidence, which fell to a record low in October.

A deal to unite GM and Chrysler hit a wall after the Bush administration last week ruled out funding it, leaving any merger between the companies contingent on federal aid under the next administration, people familiar with the talks said.

October sales fell from bad to worse amid the financial sector failures that forced a $700 billion bailout plan in the United States and numerous props for banks in other countries.

“Auto companies just don’t make money in a recession,” Morgan Stanley analyst Adam Jonas said in an October note to clients referencing the slowdown in European automaker results that is just as relevant for U direct payday loan cash advance.S. companies.

While the talks between GM and Chrysler owner Cerberus Capital Management LP have taken most of the spotlight, Ford also has had discussions with policymakers about the challenges facing the industry and the automaker.

“We just want to make sure we continue that ongoing dialogue and make sure that whatever happens there is a degree of parity,” Mark Fields, Ford’s president of the Americas, told reporters last week.

Ford earlier in 2008 said it would accelerate plans to bring European-designed cars to North America and convert some pickup truck plants to car production. It is expected to provide a business plan update on Friday.

WHERE THE RUBBER HITS THE ROAD

GM’s U.S. sales were down more than 20 percent in 2008 through October, while Ford sales were down 18 percent in its core brands. Both lagged the 15 percent industry decline.

In recent years, special charges have been hard to predict for Ford and GM due to massive North American restructurings that have failed to keep pace with eroding markets. They combined for $17.1 billion of charges in the second quarter.

Charges could include costs for white collar job cuts and buyouts of unionized hourly workers. Ford cut white collar expenses in the summer and told the UAW in September that it had about 4,000 more hourly workers than it needed. 

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The global downturn is forcing South Korea, Thailand and Indonesia to put on ice long-planned privatizations of banks which are either now needed as policy tools or look unattractively short of capital.

As crumbling financial markets hammer asset values of banks across Asia and with no sign of any quick recovery, governments are unlikely to dare loosen control over banks already in their charge and may well tighten their grip.

“In the current situation, governments have to take a leading role in stabilizing financial markets and that could be done through state-run banks,” said Park Jeong-hyun, a Hanwha Securities analyst in Seoul.

“Bank privatization should come once financial markets stabilize and we gain confidence in them.”

The delay also means retreating from attempts to reform and consolidate the region’s battered banking sector, which Asian governments spent hundreds of billions of dollars bailing out in the wake of the 1997-98 Asian financial crisis.

It also removes potential extra revenue just as governments want to boost fiscal spending to cushion the impact of a looming global recession.

Governments around the world have so far agreed to inject more than $4 trillion into banks, nationalizing some and guaranteeing deposits for many.

“In the short term, we should expect to see more government intervention in banks in order to support them through the credit crisis, not less,” said David Marshall, Managing Director of Fitch Ratings.

“In some other countries, banks are being wholly or partly nationalized as part of government support mechanisms cash advances pay day loan. I would not expect to see this happen on a significant scale in Asia but banks may well need liquidity support from central banks.”

DELAYS

The Bank of Thailand’s rescue arm, Financial Institutions Development Fund (FIDF), said last month market conditions meant it was not ready to sell stakes in Krung Thai Bank KTB.BK, Thailand’s No. 2 bank, or Siam City Bank SCIB.BK.

When South Korea’s chief financial regulator, Jun Kwang-woo, said the government would be flexible about the timing of privatizing Korea Development Bank (KDB), it was taken as a signal of a delay in what has been central to ambitious financial reforms President Lee Myung-bak wanted to wrap up by 2012.

South Korea has also put off cutting its 73 percent stake in Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz), the country’s No. 2 financial services group, and the Industrial Bank of Korea (IBK) (024110.KS: Quote, Profile, Research, Stock Buzz), citing market conditions.

Full privatization of the three banks is valued at more than 37 trillion won ($29 billion), according to a KDB estimate and market prices.

Instead, the government is now set to inject 1 trillion won in KDB and 500 billion won into IBK to give them room to expand lending to cash-strapped small companies. 

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The Dow ended its worst week ever Friday and capped a staggering eight-session selloff that has seen the blue-chip index fall 2,400 points.

Investors could be in for another rough ride as Citigroup (C, Fortune 500) and Merrill Lynch (MER, Fortune 500) are on tap to report results this week, giving another glimpse into just how deep their losses continue to be. And a slew of economic reports are also due out, including readings on consumer spending and housing.

Much of the Dow’s loss occurred over the most recent sessions as the global credit market crisis intensfied. In fact, last week the Dow fell just over 1,874 points, or 18%. The index has lost nearly 22% over the last eight sessions, as panicked investors ditched stocks across the board.

That panic also gripped the global markets, which have seen some brutal selloffs of their own.

"The magnitude of what’s going on is unprecedented and people are frightened," said Robert Philips, senior portfolio strategist at BLB&B Advisors.

Finance ministers from the Group of Seven nations said Friday that exceptional steps were needed to ease the global financial crisis and get money flowing again.

And early Saturday, the G-7 vowed to work together to stem the criris. Later in the day, the International Monetary Fund soundly endorsed the G-7 commiment, with IMF managing director Dominique Strauss-Kahn saying the crisis "had pushed the global financial system to the brink of systemic meltdown."

Wall Street lost roughly $2.4 trillion in market value during the week, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.

And investor fear surged to record levels, with the CBOE Volatility (VIX) index, or the VIX, hitting a record just shy of 77 Friday, before closing a bit off those levels.

The Dow Jones industrial average (INDU) ended Friday’s session down just 128 points, after falling as much as 697 points in the morning. The Standard & Poor’s 500 (SPX) index also declined Friday and for eight sessions in a row. The Nasdaq composite (COMP) ended barely higher, following seven down sessions.

Paralyzing fear. Banks have clamped down on capital, with credit markets remaining frozen and several measures of bank nervousness hitting all-time highs. Treasury prices slumped, boosting the corresponding yields as investors no longer bet that government debt was necessarily so much safer than stocks. The dollar recovered versus other major currencies. And oil, gold and other commodities plunged on bets that slowing global demand will hurt oil usage.

"Investors are the most fearful they’ve ever been," said Phil Orlando, chief equity market strategist at Federated Investors.

The heightened volatility that has left investors seasick was evident in Friday’s market. In the first five minutes of trade Friday the Dow plunged 697 points, falling below 7,900 to the lowest point since March 17, 2003. The Nasdaq and S&P also hit more than five-year lows. But stocks recovered abruptly, with the Dow erasing losses. The afternoon saw the Dow make violent swings back and forth, toppling as much as 600 points and rising as much as 322 points.

Stocks have plunged despite a series of efforts on the part of the government to unfreeze the credit markets and get money flowing through the system again.

"Fear is feeding upon itself and nothing the officials have done to this point seems to stem the tide," said Ryan Atkinson, market analyst at Balestra Capital.

Last week, the Fed announced an emergency rate cut, coordinated with banks around the world. The central bank has also pumped billions into the system. But the moves have hardly made a dent in investor sentiment.

"Central banks of the world have been flooding the markets with liquidity, but banks are hoarding cash," Atkinson said. "This is the lynchpin of the entire financial system and as long as this is still going on, the markets will be driven by fear."

On Friday, President Bush said that the government will continue to work to resolve the economic crisis to return stability to the markets. Meanwhile, House Democrats are meeting Monday to discuss a potential second economic stimulus package, although House Republicans are reportedly skeptical of a second package, CNN reports.

Looking for a bottom: Stocks have been in a bear market for most of the year, but the selling began accelerating in September following a series of bank failures and mergers.

Since hitting all-time highs a year ago, the Dow has lost just over 40% and the S&P 500 has lost 43% bad credit payday advance. The Nasdaq has not come close to reclaiming its tech-bubble record, but it did hit multi-year highs last October. Since then, the Nasdaq has fallen just over 42%.

And investors across the board are pulling money out of equities, with $43.3 billion pulled out of stock mutual funds during the week ended Oct. 8, according to TrimTabs Research.

"To some extent, we are seeing a retail investor capitulation," said Kelli Hill, portfolio manager at Ashfield Capital Partners. "And when everyone is getting out, that suggests we’re getting closer to finding a bottom," she said.

Wall Street was last in a bear market between 2000 and 2002 amid the end of the tech bubble, a recession and the terrorist attacks on 9/11. But stocks bottomed in October 2002 and then again in March 2003, leading to a more than four-year bull market.

On Friday, the three major stock gauges fell to within shouting distance of that March 2003 bottom. Some market pros are wondering if that 2003 level could turn out to be the bottom for the 2008 bear market also. (Full story)

However, bottoms are often "retested," meaning stocks fall to a low, bounce for a few days or even months, then fall back to right around that low, before making a bigger, more sustained advance off the low.

That’s what happened in the last bear market. Stocks bottomed in early October 2002, bounced a little bit in the lead up to the start of the Iraq war and then retested those lows in March of 2003 before moving higher.

Either way, the analysts spoken with agree that when the market does finally put a bottom in place, it will lead to an extensive rally.

One comfort for investors is the knowledge that there are limits to how low the Dow can go, thanks to rules put in place in the aftermath of the crash of Oct. 19, 1987, when the Dow plunged 22.6%. The NYSE has rules to halt trading if the Dow loses 10%, 20% or 30% in a single day. Trading is halted for 30 minutes, an hour or two hours, depending on the time of day. Trading is over for the day if the Dow loses 30%.

The Dow’s 22% decline roughly compares with the two-day slide in the crash of 1929. On Oct. 28, 1929, the Dow fell 12.8% and it It fell an additional 11.7% the next day, according to Stock Trader’s Almanac.

Bear vs. Bull: Looking for a bottom

Credit markets frozen: Amid the ongoing crisis, lending has dried up, making it difficult for businesses to function on a daily basis and for consumers to get loans.

The TED spread, the difference between what banks pay to borrow from each other for three months and what the Treasury pays, spiked to an all-time high of 4.65% Friday before pulling back slightly.

The wider the spread, the more reluctant banks are to lend to each other, rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.

Three-month Libor, or what banks charge each other to borrow for three months, rose to a 2008 high of 4.82% Friday.

The yield on the 3-month Treasury bill, seen by many as the safest place to put money in the short term, fell to 0.24% from 0.5% Thursday, with panicked investors willing to take a piddling return on their money rather than risk stocks. Last month, the yield on the 3-month bill skidded to a 68-year low around 0%.

But in a sign that banks were willing to take a chance on near-term lending, Libor, the overnight bank lending rate, eased to 2.47% Friday from 5.09% Thursday, according to Bloomberg.com. Libor was at 2.15% a month ago.

Treasury prices slipped at the end of the week, raising the yields. The benchmark 10-year note ended Friday’s shortened session at 3.88%. Treasury bond markets closed early Friday and are closed Monday for Columbus Day.

Other markets: Oil prices plunged $8.89 a barrel Friday, the second biggest decline ever, to settle at $77.70 a barrel on the New York Mercantile Exchange, a 13-month low.

Oil prices have tumbled on bets of slowing demand since the price of crude hit an all-time high of $147.27 a barrel on July 11.

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The Federal Reserve and other countries’ central banks announced new steps Monday that makes billions of dollars available to squeezed banks here and abroad to battle a worsening credit crisis that threatens to unhinge the U.S. economy.

The Fed said the action is intended to "expand significantly" the cash available to financial institutions in an effort to relieve to the worst credit crisis since the Great Depression. In taking the action, the Fed cited "continued strains" in the demand for short-term funding.

Central banks will continue to work closely and are prepared to take "appropriate steps as needed" to ease the crisis and get banks lending again, the Fed said.

Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.

That move will triple the supply of 84-day loans to $225 billion, from $75 billion, the Fed said.

Meanwhile, the Fed will continue to make $75 billion worth of shorter, 28-day loans available to banks.

All told, the total amount of cash loans - 84-day and 28-day - available to banks will double to $300 billion from $150 billion, the Fed said.

Moreover, the Fed will make a total of $620 billion available to other central banks, expanding ongoing currency "swap" arrangements with them where dollars are traded for their currencies cash advance loans. That’s up from $290 billion previously in such arrangements.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Swiss National Bank and the central banks of Denmark, Norway, Australia and Sweden are involved in those swap arrangements.

The move comes as the U.S. financial meltdown’s tendrils have ensnared banks in Britain, the Benelux and Germany. 

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Local auto dealer Robert Tieman has been dismissed from a lawsuit filed last week by GMAC LLC, the financing arm of General Motors Corp., against Feld Chevrolet Co. in Bridgeton.

Tieman, the owner of South County Auto Center in Weldon Spring, was named as a defendant in a lawsuit filed Wednesday in St. Louis County Circuit Court.

The suit said Feld Chevrolet closed its sales office and lot at 11200 St. Charles Rock Road, and sold used vehicles to Tieman in ways that violated financing agreements between Feld Chevrolet and GMAC. Auto dealers who sell GM vehicles borrow money through GMAC to finance their inventory.

According to the filing, GMAC did not receive money for the vehicles that Feld Chevrolet sold to Tieman.

However, Tieman corrected the situation by paying GMAC for the vehicles, and the financing company dropped legal action against him.

Tieman, a local auto dealer for nearly 20 years, told the Post-Dispatch on Monday that he has been a longtime buyer from Feld Chevrolet. When he bought vehicles — which included Chevrolet Trailblazers, Cobalts and Impalas — on Sept. 12, Tieman didn’t see any red flags with the deal, he said Monday.

After GMAC contacted Tieman last week about its agreements with Feld Chevrolet, Tieman rewired $472,850 he had paid to Feld Chevrolet and sent that money to GMAC for the vehicles.

Mike Stoller, a spokesman for GMAC, said Tieman was still named in the lawsuit Wednesday, the same day he wired the money, because lawyers filed the petition before the money was received.

"Mr free credit report instantly. Tieman responded and acted appropriately," Stoller said this week.

Tieman officially was dismissed from the lawsuit on Friday, according to a court document.

Meanwhile, GMAC’s lawsuits against Feld Chevrolet continue.

Feld Chevrolet President Andrew Wolfson, whose family has been in the St. Louis auto industry for about 60 years, said Monday that his dealership and GMAC "still have some issues to deal with" and declined to elaborate.

Wolfson told the Post-Dispatch that he had to close the Chevrolet dealership because the location had been losing money, which led GMAC to cancel its credit agreement. He said he couldn’t find a new credit source in the tough credit markets and couldn’t finance his inventory of vehicles.

Wolfson said he does not plan to re-enter the auto sales business.

atablac@post-dispatch.com | 314-340-8140

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