New York — Wall Street’s worst fears came to pass Monday, when the government’s financial bailout plan failed in Congress and stocks plunged precipitously — hurtling the Dow Jones industrials down nearly 780 points in their largest one-day point drop ever. Credit markets, whose turmoil helped feed the stock market’s angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.
Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down the plan in mid-afternoon, and as they saw stock prices tumbling on their monitors. Activity on the floor became frenetic as the “sell” orders blew in.
The Dow told the story of the market’s despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.
The selling was so intense that just 162 stocks rose on the NYSE — and 3,073 dropped.
It takes an incredible amount of fear to set off such an intense reaction on Wall Street, and the worry now is that with the $700 billion plan fate uncertain, no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover. While investors didn’t believe that the plan was a panacea, and understood that it would take months for its effects to be felt, most market watchers believed it was a start toward setting the economy right after a credit crisis that began more than a year ago and that has spread overseas.
“Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that,” said Chris Johnson president of Johnson Research Group. “This isn’t a market for the timid.”
The plan’s defeat came amid more reminders of how troubled the nation’s financial system is — before trading began came word that Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc. It followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies — Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc.; all of them were felled by bad mortgage investments.
And it raised the question: Which banks are next, and how many? The Federal Deposit Insurance Corp. has a list of over 110 banks that were in trouble in the second quarter, and that number surely has grown in the third.
Wall Street is contending with all these issues against the backdrop of a credit market — where bonds and loans are bought and sold — that is barely functioning because of fears that anyone lending money will never be paid back. The evidence of the credit markets’ ills could again be found Monday in the Treasury’s 3-month bill — investors were stashing money there, willing to take the tiniest of returns simply to be sure that their principal would survive in what’s considered the safest investment. The yield on the 3-month bill was 0.15, down from 0.87, and approaching zero, a level reached last week when fear was also running high.
On Wall Street, according to preliminary calculations, the Dow fell 777.68, or 6.98 percent, to 10,365.45. The decline also surpasses the 721.56-point intraday decline record also set during the first trading day after the terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.
Broader stock indicators also tumbled. The Standard & Poor’s 500 index declined 106.85, or 8.81 percent, to 1,106.42.
The technology-heavy Nasdaq composite index fell 199.61, or 9.14 percent, to 1,983.73.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Local News
Stocks tumble as bailout plan fails in House
- Local News
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SAFETY DAY
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Poplarville aldermen honor Holliday, get audit report briefing
The city board of aldermen honored former District Three Supervisor Hudson Holliday at its Tuesday night meeting.
Mayor Billy Spiers presented Holliday with a framed resolution of appreciation for his dedication and service to the city while serving as county supervisor.
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MRI INSTALLED
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Hall suspected of robbery after escaping
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City Hall expansion groundbreaking held
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PRC athletic director says he’ll recommend random drug testing
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Following a short presentation by State Sen. Tony Smith (R-Picayune), the board of supervisors adopted on Monday a resolution encouraging state officials and agencies to exercise “fairness and parity” regarding location of new industries in Mississippi.
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MDEQ wants comprehensive waste disposal plan from county
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