NEW YORK — Wall Street’s March rally is on hold after the White House rejected turnaround plans from General Motors Corp. and Chrysler LLC and gave investors an economic reality check.
Major indexes fell about 3 percent Monday, including the Dow Jones industrial average, which lost about 254 points but finished well off its lows. Financial stocks weighed heavily on the market amid worries that banks will need fresh injections of capital.
Fears of an automaker bankruptcy have been looming over investors for months, and the latest developments, including the removal of GM chief executive Rick Wagoner, made the market uneasy about the industry and the economy. However, analysts said the pullback, which began with a 148- point drop in the Dow on Friday, wasn’t surprising after the average surged 21 percent over 13 days.
“The market had a very significant rally off the lows,” said David Katz, chief investment officer at Matrix Asset Advisors. “We think it’s just taking a breather.”
The Dow tumbled 254.16, 3.3 percent, to 7,522.02. It was down as much as 339 points, so the market’s ability to pull above its lows on light trading volume could signal that investors aren’t ready to give up on the rally.
The Standard & Poor’s 500 index fell 28.41, 3.5 percent, to 787.53, while the Nasdaq composite index fell 43.40, 2.8 percent, to 1,510.80.
Despite the two-day retreat, the Dow is still up 975 points, 14.9 percent, from its low March 9, when it ended at its worst level since April 1997. The S&P 500 is still up 16.4 percent from its low.
The March rally was fed by economic and corporate reports that were starting to look more encouraging. Now, investors are taking money out of the market ahead of economic numbers this week and first-quarter earnings in the weeks ahead, fearing that disappointing data, including the government’s March employment report Friday, will set the market back.
Banks have been a driving force behind the market’s rally this month, and analysts now expect those shares to see some of the biggest declines as investors become more conservative ahead of first-quarter earnings reports in the next few weeks. Bank of America Corp. fell 17.8 percent Monday, and Citigroup fell 11.8 percent.
