Automaker, Supplier Shares Fall Following Interest Rate Cut

Shares of automakers and their suppliers largely fell Tuesday, after the Federal Reserve cut a key interest rate by one-quarter of a percentage point. The reduction in the federal funds rate to 4.25 percent marked the third consecutive rate cut and is expected to be matched by a cut in the prime rate that commercial banks use as the base for consumer and business lending, which could translate into lower rates for auto loans. Fed officials signaled that further cuts were possible if a severe downturn in housing and a crisis in mortgage lending get worse.

From AFX News Limited

NEW YORK — Shares of automakers and their suppliers largely fell Tuesday, after the Federal Reserve cut a key interest rate by one-quarter of a percentage point.

The reduction in the federal funds rate to 4.25 percent marked the third consecutive rate cut and is expected to be matched by a cut in the prime rate that commercial banks use as the base for consumer and business lending, which could translate into lower rates for auto loans. Fed officials signaled that further cuts were possible if a severe downturn in housing and a crisis in mortgage lending get worse.

The overall U.S. markets turned down after the cut was announced at 2:15 p.m. Investors had been expecting policymakers would cut rates for a third straight time, but there had been debate over the size of the cut.

One stock in the sector that sustained earlier gains was ArvinMeritor Inc. The Troy, MI-based supplier said Tuesday morning it will buy Mascot Truck Parts Ltd. of Ontario, Canada, and affirmed its full-year earnings and revenue guidance, offering a range that was above analyst expectations.

Here’s how the automakers and some of their suppliers traded after the release of the Fed decision:

General Motors Corp. fell $1.01, or 3.5 percent to $27.99.

Ford Motor Co. fell 6 cents to $7.08.

American Axle & Manufacturing Holdings Inc. fell 81 cents, or 3.9 percent, to $19.91.

BorgWarner Inc. fell $1.45, to $99.66.

Lear Corp. fell 92 cents, or 3.1 percent, to $29.25.

Johnson Controls Inc. fell 44 cents to $37.76.

Magna International Inc. fell 6 cents to $80.65.

Tenneco Inc. fell $1.08, to 3.9 percent, to $26.91.

TRW Automotive Holdings Corp. fell 44 cents to $23.

Visteon Corp. fell 32 cents, or 7.1 percent, to $4.20.

ArvinMeritor Inc. rose 97 cents, or 8.6 percent, to $12.22.