US Stocks Down On Bailout Vote; DJIA Has Biggest Point Drop Ever
NEW YORK -- Looks like another Black Monday.
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By ROB CURRAN
30 September 2008
NEW YORK -- Looks like another Black Monday.
The defeat of a proposed $700 billion bailout package in the U.S. House of Representatives sent U.S. stocks plunging Monday -- the Dow Jones Industrial Average registered its largest point drop ever and the broad Standard & Poor’s 500 had its biggest percentage drop since 1987. The only stock that finished higher from the Standard & Poor’s 500 was comfort-food processor Campbell Soup.
In the House, 228 members voted against and 205 members for the bailout bill, which is now in limbo. Traders had thought the bailout the best hope of unplugging credit markets and putting an end to the domino line of failing or salvaged financial institutions.
At one Wall Street firm, traders reacted to live footage of the vote count on the floor of Congress around 2 p.m. EDT with “shock and disbelief.”
“It was almost an off-track-betting scenario,” said Joe Saluzzi, co-founder of agency brokerage Themis Trading. “You’re watching the screen, looking to see what odds your horse is at. You’re watching the screen, the yeas and nays. Most bets were for passage so they were shocked, they were angry, they were let down.”
Overall, the Dow Jones Industrial Average fell 777.68 points, or 6.98%, to 10,365.45, its biggest one-day point drop ever, its biggest percentage drop since the session after the Sept. 11, 2001 terrorist attacks, and its lowest close in almost three years, dating back to November 2005.
In two reflections of the chaos, the New York Stock Exchange took the unusual step of halting one of the hottest stocks of the day, Wachovia, for most of the session.
The Dow took nearly 15 minutes to settle, according to FactSet, longer than seems possible in the electronic-trading age. Just after the final bell at the New York Stock Exchange, the blue-chip index was showing a nearly 600-point decline. By 4:12 p.m. EDT that had ballooned to a 738-point loss. Around 4:15 p.m., the Dow settled down 778 points.
“There were huge sell imbalances at the close,” said Scott Peterson, a spokesman for NYSE. That means a flood of sell orders came in at the closing bell, and because of the imbalance, it took longer than usual to fill the orders.
“It was greater than the market could absorb, so it just took a while to work the whole thing through.”
About 7.3 billion shares changed hands on the NYSE Composite, not far from the record of 10 billion marked earlier this month.
The professionals’ gauge of the U.S. stock market, the Standard & Poor’s 500 Index, slid 106.44 points, or 8.77%, to 1106.57, its lowest close since October 2004, and its biggest percentage drop since Oct. 26, 1987, one week after the original Black Monday. On Oct. 19, 1987, the S&P 500 fell 20%.
The technology-oriented Nasdaq Composite fell 199.61 points, or 9.14%, to 1983.73, its lowest close since May 2005 and its biggest drop since the technology bubble burst in 2000.
On the broadest gauge of stocks, the Dow Jones Wilshier 5000, the paper loss on the session was about $1.2 trillion.
Shares of Wachovia fell 8.16, or 82%, to 1.84 after Citigroup agreed to buy its banking operations for about $2.1 billion in stock, in a deal facilitated by the Federal Deposit Insurance Corp., which agreed to assume losses above a certain level. Shares of Wachovia were halted until around 2:30 p.m. EDT, after the fate of the bailout was decided.
“I just bought 10,000 of Wachovia stock on Friday at $8.38 a share,” wrote one anxious investor in an email to Dow Jones Newswires prior to the reopening. “What will happen to my money?”
Shares of Citi, a Dow component, fell 2.40, or 12%, to 17.75.
Traders bet the freeze in credit markets would take an immediate toll on the broader global economy, pummelling stocks from every sector and nationality, and seeking cover in cash and gold. Among the few instruments that glittered on the stock market was the SPDR Gold Trust, which rose 2.93, or 3.4%, to 89.57.
In more reflections of fear, Treasury prices shot higher and the Chicago Board Options Exchange volatility index hit its highest level since 2002.
Financial stocks plunged, testing bear-market lows, as traders feared who would be next in need of a rescue, joining a list that includes Wachovia, British lender Bradford & Bingley, British-Dutch institution Fortis, Washington Mutual, American International Group and Lehman Brothers Holdings. All those giants have failed, or required government intervention, in the space of two weeks.
“You’re going without a net now,” said Saluzzi, of Themis. “The safety net was this plan. Now you’re like, “Now what’?”
Shares of regional bank National City fell 2.35, or 63%, to 1.36. Sovereign Bancorp plunged 6.04, or 72%, to 2.33.
The biggest decliner on the Dow was credit-card provider American Express, which fell 6.95, or 18%, to 32.55. Bank of America fell 6.45, or 18%, to 30.25.
Selling was so pervasive that only one stock in the S&P 500 showed a gain by the close of the session: Campbell’s Soup rose 12 cents, or 0.3%, to 37.75 as investors bet consumers would turn to comfort food in times of distress.
The price of oil, often a reflection of markets’ expectation of economic growth, plummeted more than $10 a barrel to roughly $96. The biggest declining sector on the S&P 500 after the financials was the energy sector.
Shares of Exxon Mobil fell 6.59, or 8.2%, to $74.06, wiping out about $35 billion in stock market value. Chevron fell 9.45, or 11%, to 77.60.
Among other commodity stocks, U.S. Steel fell 14.93, or 17%, to 72.33, and has lost almost two-thirds of its value since its summer peak of 196.
Class B shares of Berkshire Hathaway rose 33, or 0.8%, to 4,458 as investors bet Chairman Warren Buffett, for one, will ride out this crisis.