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Specialist Igor Lerner of Barclays Capital, center, works with traders on the floor of the New York Stock Exchange Monday in New York. Wall Street's March rally is on hold after the White House rejected turnaround plans from GM and Chrysler and gave investors an economic reality check. - AP

Stocks tumble as automaker plans are rejected

NEW YORK — Wall Street's March rally is on hold after the White House rejected turnaround plans from General Motors Corp. and Chrysler 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, which included the removal of GM's CEO Rick Wagoner, made the market even more uneasy not only about the industry, but the overall economy. However analysts said the pullback, which began with a 148-point drop in the Dow Friday, wasn't surprising after the average surged 21 percent over just 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."

According to preliminary calculations, the Dow tumbled 254.16, or 3.3 percent, to 7,522.02. The Dow was down as much as 339 points so the market's ability to end off 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, or 3.5 percent, to 787.53, while the Nasdaq composite index fell 43.40, or 2.8 percent, to 1,510.80.

Despite the two-day retreat, the Dow is still up 975 points, or 14.9 percent, from its low on March 9, when it ended at its worst levels since April 1997. The S&P 500 index 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 on Friday, will set the market back.

The problems still facing automakers and banks gave investors more incentive to sell.

President Barack Obama refused further long-term federal bailouts for GM and Chrysler, saying the companies needed to get more concessions from unions, creditors and others before the money could be approved. He also raised the possibility of controlled bankruptcy for one or both of the companies.

"It was a pretty sharp reminder that there are some difficulties here," said Matt King, chief investment officer at Bell Investment Advisors.

Underscoring the fear that the financial industry's troubles are far from over, Treasury Secretary Timothy Geithner said Sunday banks would likely need considerably more money.

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