Stocks plunge on worries about economy, automakers

NEW YORK -- Stocks tumbled Tuesday as investors grew more doubtful that the government can quickly turn around the weakening economy.

Investors in the U.S. and abroad are realizing that President Barack Obama's $787 billion government stimulus can only do so much, and that the recession may take a while to run its course.

Another big worry on Wall Street is that General Motors and Chrysler might not be able to prove by Tuesday's deadline they can repay billions of dollars in loans and return to profitability.

The Dow Jones industrial average fell 297.81 points, or 3.8%, to 7,552.60.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 37.67, or 4.56%, to 789.17. The Nasdaq composite index fell 63.70, or 4.15%, to 1,470.66.

Only 219 stocks rose on the New York Stock Exchange while nearly 2,900 fell. Volume came to 1.6 billion shares.

The markets were closed Monday for Presidents Day.

Sam Stovall, chief investment strategist at Standard & Poor's, said Wall Street is nervous GM will say it cannot survive without more money — an admission that would then lead investors to ask, "What if GM does go under?"

The failure of a company with the name recognition of GM would "impact the psyche of the average consumer," Stovall said. Consumers have already been sharply reining in spending.

The market also got some grim economic news on Tuesday. The New York Federal Reserve's regional manufacturing index showed a much deeper contraction in activity than expected.

President Barack Obama signed the $787 billion stimulus package into law Tuesday. He will also be outlining a plan to help stem mortgage foreclosures Wednesday.

Investors are looking at the stimulus package "as something that will be helpful, but not a silver bullet," Stovall said. "People are realizing the recession will take time."

Last week, stocks had plunged as investors optimism waned over the stimulus package and the Treasury Department's new bank bailout plan.