Stocks plunge as House votes down bailout plan; Dow drops 778
NEW YORK -- Stocks plunged Monday in the worst drop since the Sept. 11 terrorist attacks, after the House of Representatives voted down the $700 billion Wall Street financial rescue package.
The Dow Jones industrial average suffered its single worst point drop ever, a 777.68-point nosedive to 10,365.45 after the House voted against the plan that was stitched together over the weekend by adminstration officials and congressional leaders to try to stabilize financial markets and unthaw frozen credit markets.
The Dow's 7.0% loss was its 17th-worst percentage loss in history, according to Dow Jones indexes.
"The market is upset they didn't pass the bill," says Todd Leone, trader at Cowen & Co. "The fear is we will get a worst-case scenario" for the economy, he says. "Wall Street is telling Congress to get this deal done."
But the "no" vote doesn't preclude a deal getting done eventually, a fact that could still give investors a reason for hope that the stock market's problems won't make the economy collapse too.
Broader market indexes were also lower, with the Standard & Poor's 500 down106.85, or 8.8%, to 1,106.42, its lowest close since October 2004. Only one S&P 500 stock — Campbell Soup — ended the day with a gain. The Nasdaq composite was off 9.1%, or 199.61 points to 1,983.73.
Before the vote, Hugh Johnson, chief investment strategist at Johnson Illington Advisors, said a key first step to stabilizing markets was for the bill to be approved by the House. But that did not happen.
Major institutional investors were unsure if the bill in its current form would solve the credit crisis. But most thought the passage of the bill would be better than no bill at all.
"The worst thing you can do is nothing," BlackRock investment strategist Bob Doll said earlier in the day.
Frozen credit markets, which the government's plan was aimed at fixing, showed little signs of thawing, said Bill Hornbarger, fixed-income strategist at AG Edwards.
The yield on three-month Treasury bills, considered a super-safe investment, plunged to 0.15% from 0.84% on Friday. At one point early Monday, the yield went negative — meaning investors were willing to pay the government a premium to stash their money in a super-safe short-term IOU.
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