GM Misses And Oil Hisses Toward $100

By Keith Fitz-Gerald

Contributing Editor

In early morning trading yesterday (Wednesday), the market appears to be upset by the twin assaults of a staggering $1.6 billion loss posted by No. 1 U.S. carmaker General Motors Corp. (GM) and crude-oil prices, which are [still] rising toward that psychologically intimidating $100 a barrel price level.

Stocks went into a freefall. The Dow Jones Industrial Average yesterday plunged 360.92 points, or 2.64%, to close at 13,300.02. That 30-stock proxy for the broader market is now down 6.3% from its record high of 14,198.10. The broader Standard & Poor's 500 Index fell 44.65 points, or 2.94%, to close at 1,475.62. The tech-laden Nasdaq Composite Index skidded 76.42 points, or 2.7%, to close at 2,748.76.

GM's shares spun downward by $2.19 a share, or 6.06%, to close at $33.97.

And the reason for the across-the-board sell-off in stocks was clear.

First GM: Not only is this far worse than Wall Street expected, but it's one of the largest quarterly losses of all time for any company. They're also writing down $39 billion non-cash charge related to tax credits over the last three years.

GM is pointing the finger elsewhere, citing a soft auto market, a union strike, and all kinds of other woes.

Come on guys. This is like saying the dog ate your homework.

Toyota's sales are sluggish too, but their profits are up 11% and it's raising its earnings forecasts for the year.

Yet another reason to go global.

Now For Oil: We've been talking about this ad nauseam with Money Morning readers for the past few months. To repeat, oil is going far higher before this is done. $100 a barrel is going to be the new $70, which was once the new $30.

There was a lot of laughter when I originally predicted this at a time when oil was trading under $20 a barrel years ago. Nobody's laughing now, but there are a lot of people who are profiting.

Speaking of which, if you've got the right stuff in your portfolio, your investments are going to more than take the sting you feel in your wallet.

They're also going to reinforce a global view…they have to. Higher oil is as much of a factor as the weaker dollar and unrest in the Middle East. That's only logical given oil is priced in dollars, forcing producers to raise their prices with each drop in Bernanke's buck.

Traders may try to make a stand here, but let's not hold our breath today.

News and Related Story Links:

• Money Morning Investing Research Report:
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• Money Morning News Analysis:
  Toyota Profit Boosted by Higher Sales and Weaker Yen.

• Money Morning Investment Analysis:
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• Money Morning Investing Research Report:
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• Money Morning Investment Analysis:
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