Stocks set to drop on China letdown, GM news

[March 05, 2009]  NEW YORK (AP) -- Stocks are set to resume their plunge Thursday, as China deflated investors' hope that the country will boost spending and worries re-emerged about General Motors Corp.

Chinese Premier Wen Jiabao said the government's stimulus plan would help the world's third-largest economy grow by 8 percent this year. He stopped short, however, of delivering the promise of new stimulus measures.

The hope that China would unveil more government spending was a major trigger for the stock market's bounce Wednesday. Wednesday's stock rally followed a five-day pummeling that left the market at its lowest levels since 1997.

The market's upbeat tone appeared to be short-lived, as investors early Thursday prepared to move out of stocks and back into safer assets like Treasurys and gold.

Another piece of gloomy news: General Motors announcing in its annual report that its auditors have raised serious doubt about the automaker's ability to continue operating. GM has already received $13.4 billion in federal loans, and seeking a total of $30 billion from the government.

Ahead ofthe market's opening, Dow Jones industrial average futures dropped 105, or 1.54 percent, to 6,725. Standard & Poor's 500 index futures lost 9.90, or 1.40 percent, to 698.50, and Nasdaq 100 index futures fell 3.25, or 0.30 percent, to 1,097.75.

Later Thursday, major retailers will be reporting monthly sales figures.

Government bond prices edged modestly higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.97 percent from 2.98 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.25 percent.

Gold prices advanced, even as the dollar rose against other major currencies.

Light, sweet crude fell $1.20 to $44.18 a barrel in electronic pre-market trading on the New York Mercantile Exchange.

Markets overseas were mostly lower. Japan's Nikkei stock average rose 1.95 percent after Wall Street's Wednesday rally, but Hong Kong's Hang Seng index fell 0.97 percent. In late morning trading, Britain's FTSE 100 was down 1.80 percent, Germany's DAX index was down 1.83 percent, and France's CAC-40 was down 1.43 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com/

Nasdaq Stock Market: http://www.nasdaq.com/

[Associated Press; By MADLEN READ]

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