Local companies feel pain of stock slide

While overseas markets plummeted and crippled the American stock market on Monday, local companies and investors saw an unprecedented freefall in stocks and confidence in the economy.

While the Dow melted down a record 800 points before slightly "recovering" to close at 370, similar volatility loomed over the Daily Herald index. The Chicago area list of companies plunged about 34 percent.

Local companies suffering the most included Chicago-based UAL Corp., parent of United Airlines, with a 17 percent drop, Lake Forest-based Tenneco Inc. and Naperville-based Tellabs Inc. each with about 12 percent and Schaumburg-based Motorola Inc. with 9 percent.

"I don't know when the actual bottom will be hit, but our economy is much slower here due to our industry," said Alexander Paris Sr., chief economist with Barrington Asset Management. "I'm contrary to most and believe we're actually in the final stages of a downturn that started about three years ago with the housing market."

But we shouldn't feel it's all doom and gloom. Oil also dropped to about $88 a barrel, compared to $147 in July. That means gasoline prices could also drop in coming months and provide some relief for consumers, Paris said.

The markets have been in turmoil with panic selling, especially last week while the $700 billion federal bailout for financial institutions was in flux. Yet the approval of the recovery plan on Friday was expected to provide the markets with some relief by Monday. Instead, the likelihood of the plan taking months to go into effect, overseas banks continuing to fail, and a stagnant credit system all led to the stock market's freefall on Monday, analysts said.

"It's been tough here locally, like everywhere, and people have lost a lot on paper now," said Thomas Rowan, director of institutional portfolio management for Fifth Third Bank in Chicago. "People have seen their home prices decline and now their investments. It's been very distressing."

No sector left the market unscathed, While financial institutions led the pack, others including technology, followed. Many investors fled to gold or U.S. treasuries, thinking they were more secure investments. People with 401(k)s were limited by what their companies offered, said Rowan.

"There's clearly been a breakdown in confidence... and it could take months for the bailout to work," said Rowan. "We had hoped it would have at least emotionally restored confidence. But other factors with the credit crisis were at stake here and caused more of a crisis overseas."

The crisis in confidence likely will work its way into the lives of everyday people very soon, said Diana Joseph, managing partner and senior portfolio manager for Dearborn Partners in Chicago.

"Companies here will have a hard time getting credit and that will lead to a reduction in inventory and staffing. They (companies) will do whatever they need to do to stay liquid," Joseph said.

Layoffs and a tighter job market could force people to have less to spend tomorrow, so they should start spending less now. That will become more evident in the sales of autos, vacations and other high-ticket purchases.

But everyone needs a long-term vision on spending and saving plans, Joseph said.

"Credit is like the oil that makes the economic engine move, and we're not moving now," Joseph said.

Biggest losers

These local companies had the biggest drop in percentage on the stock market on Monday.

Company Close Loss percentage

UAL $6.70 -1.41 17%

Tenneco $7.38 -1.09 13%

Tellabs $3.46 -0.49 12%

Motorola $5.98 -0.74 11%

AAR $13.35 -1.31 9%

Exelon $55.20 -4.99 8%

Nalco $15.37 -1.05 6%

Inland Real Estate $13.04 -0.83 6%

Acco $6.32 -0.40 6%

McDonald's $56.90 -3.33 5%

Source: Daily Herald Index