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U.S. stocks tumble as bailout plan fails in House

September 29th, 2008 9:42 PM by Lehel Szucs

what will happen tomorrow?

U.S. stocks tumble as bailout plan fails in House

The Dow Jones industrial average falls more than 700 points. Financial stocks in the S&P 500 plummet 16%.

By Walter Hamilton, Los Angeles Times Staff Writer
2:05 PM PDT, September 29, 2008

NEW YORK -- Stocks plunged today as the House of Representatives shocked Wall Street by voting down the government's proposed $700-billion financial-system bailout, ensuring a continuation of the anxiety and uncertainty pervading Wall Street.

The Dow Jones industrial average tumbled 777.68 points, or 7%, to 10,365.45.

Broader indexes hemorrhaged even more: The Standard & Poor's 500 index sank 8.7%, and the Nasdaq composite index plunged 9.1%.

Financial stocks in the S&P 500 fell more than any other broad industry group, plummeting 16%. The next-worst-performing sector was energy, which tanked 11%.

"It's not a question of bailout or no bailout, what size bailout or what type of bailout," said John Bollinger, head of Bollinger Capital Management in Manhattan Beach. "It's a question of what, in fact, is going to be done. What is needed now is for the uncertainty to be relieved."

The vote threw another monkey wrench into an already chaotic stock market, prompting investors to speculate about when and whether the rescue measure would be resurrected and how the troubled credit markets would fare in the meantime.

"The financial markets are in panic, and until politicians realize that, and until Main Street America realizes it's not a Wall Street problem -- it's a Wall Street and a Main Street problem -- the financial markets are going to be volatile and the decline is going to be hard to arrest," said John Spinello, Treasury market strategist at Jefferies.

"There is clearly shattered confidence in the financial system and people are wondering how it is going to get fixed," said Robert W. Bissell, president of Wells Capital Management in Los Angeles. "The longer it takes to have an exit plan, the more assets will sell down in price."

"What you're seeing is a market trying to find a bottom," he added. Investors "are groping to find a level that will bring cash in off the sidelines."

Oil prices, already down early in the day on fears of lower global demand for petroleum products, sank further after the vote. Crude futures for November delivery fell $10.63, or 9.9%, to $96.26 a barrel -- the biggest one-day percentage drop since November 2001.

"All of this has to do with credit," said Sean Brodrick, an analyst for the free investment newsletter Money and Markets. "If they cannot unfreeze the credit markets, it's going to mean lower oil prices."

Stocks started the day down sharply on concern that the legislation wouldn't quickly get credit flowing again or stave off a deeper economic downturn.

Yields on Treasury bills sank as investors dashed for safety. The yield on three-month Treasury bills fell near the extreme lows of last week, dropping to 0.51% from 0.85% late Friday. That indicates that investors are willing to accept virtually no return on their cash to ensure that they'll get the money back.

An agreement by Citigroup Inc. to take over the banking operations of troubled Wachovia Corp. in a government-brokered deal -- plus a series of bailouts of major banks in Europe overnight -- served as a reminder that some large banks remained at risk.

Stocks around the world fell hard overnight as news of the European bailouts raised fear that the financial crisis is increasingly infecting banks outside the United States.


Times staff writers Martin Zimmerman and Ronald D. White contributed to this report.

Posted in:General
Posted by Lehel Szucs on September 29th, 2008 9:42 PM



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