Stocks Drop After New Loan Aid Plan

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Stocks were falling around the world on Tuesday. In Asia, Japan's Nikkei dropped 3% to 8,809.30, while Hong Kong's Hang Seng Index plunged 4.77% to 14,040.90.

In Europe, London's FTSE 100 index finished down by 3.6%, while Germany's DAX index dropped 5.3% and France's CAC 40 index fell 4.8%.

Despite the pain on equity markets, Tony Crescenzi of Miller Tabak noted that stress on credit markets seemed to be easing Tuesday. The three-month LIBOR rate -- a key measure of banks' willingness to lend to each other -- was down 6 basis points on Monday, with the yield spread to the federal funds rate at a "comparatively narrow" 117.5 basis points, "a substantial improvement from the peak of 332 basis points, which was set on Oct. 10," Crescenzi says. "The yield spread is now close to what was considered normal for about four months until credit conditions deteriorated massively following [Lehman Brother's] failure in the middle of September," he says.

The U.S. auto industry remained in the spotlight Monday after news reports that President-elect Barack Obama urged outgoing President Bush to extend aid, and perhaps funds from the bailout package, to U.S. automakers. Shares of General Motors (GM) fell 13% to 2.92. In Europe, Volkswagen sought liquidity from the European Central Bank. The Financial Times reports Volkswagen will use 2.8 billion euros in securities backed by German car loans as collateral for the loans from the central bank.

Among stocks in the news Monday, Starbucks (SBUX) posted earnings of 10 cents per share, vs. 21 cents a year ago, as same-store sales in the U.S. fell 8%. Consolidated revenue rose 3%. The coffee chain said it saw no immediate signs of improvement in the global economic environment.

Toll Brothers (TOL) said it expects home-building revenue to fall 41% in the quarter ended Oct. 31, from $1.17 billion a year ago to $691 million. The luxury homebuilder expects to report impairment charges of between $120 million and $220 million. Full results are expected Dec. 4.

Alcoa (AA) says it will slash aluminum production by 350,000 metric tons per year, following a 265,000 metric tons per year drop in production just last month. FBR Capital analysts downgraded Alcoa from outperform to market perform.

Tyco International (TYC) posted earnings of 81 cents per share, vs. 57 cents a year ago, as revenue rose 6.7%. That beat Wall Street expectations for earnings of 73 cents per share.

Liz Claiborne (LIZ) reported earnings of 39 cents per share, vs. 60 cents a year ago, as revenue dropped 16%.

KKR Financial Holdings (KFN) posted earnings of 33 cents per share, vs. a $2.98 loss a year ago. The firm says it will not pay a dividend in the third quarter in an effort to retain capital.

Ticketmaster Entertainment (TKTM) posted earnings of 17 cents per share, vs. 72 cents a year ago, despite a 16% rise in revenue.

Steverman is a reporter for BusinessWeek's Investing channel.