Stocks sink even after House OKs bailout plan

NEW YORK -- Stocks turned lower and credit markets remained strained Friday after the House approved a $700 billion financial rescue plan. While Wall Street was pleased by the bill's passage, investors confronted their worries about a prolonged economic downturn, and sold nervously ahead of the weekend.

Stocks continued their downward trajectory and slumped deeper into bear market territory Friday, despite the passage of a financial rescue bill by the House of Representatives.

Credit markets remained strained as Treasury bill demand remianed high, keeping the yield on the 3-month bill at around half a percent.

Stocks were up sharply earlier in the day, jumping as much as 3%, but began heading south as soon as the legislation passed. Despite passage of the $750 billion bill, which the government says is necessary to unclog frozen credit markets and stabilize markets, investors are still skeptical as to whether the plan will succeed in fixing what ails the economy.

At the end of trading, all the major U.S. stock indexes were trading at new bear market lows.

Jeffrey Hirsch, editor of the Stock Trader's Almanac, said investors are still uncertain as to whether the government's bailout plan will ease the crisis. The problems, he adds, are not likely to go away overnight simply with a signing of a bill, partly because the economy has already showed signs of stress from the ongoing credit crisis.

The Dow Jones industrial average closed down 157.47 points, or 1.5%, to 10,325.38. The Dow is now down 27.1% from its October 2007 high.

Broader stock indexes also sank deeper into bear territory. The Standard & Poor's 500 stock index, fell 15.05 points, or 1.4% to 1099.23. The benchmark index is now 29.8% off its high, and close to eclipsing the average 31.5% bear market drop since World War II.

The technology-dominated Nasdaq composite dropped 29.33 points, or 1.5%, to 1947.39. The Nasdaq is 31.9% off its 2007 high.

"This is not the end of the story," says Hirsch. "This is the beginning. I'm not convinced we have see the worst, or last of all this."