Wall Street Ends Wild Ride Down 370 Points

$700B Bailout Fails To Ease Worries As Dow Plunges 800 Points Before Recovering Somewhat

(CBS/AP)  Wall Street suffered through another extraordinary and traumatic session Monday, with the Dow Jones industrials plunging as much as 800 points - their largest one-day point drop - before recovering to close with a loss of 370. The catalyst for the selling, which also took the Dow below 10,000 for the first time in four years, was investors' growing despair that the spreading credit crisis will take a heavy toll around the world.

Investors have come to the realization that the Bush administration's $700 billion rescue plan and steps taken by other governments won't work quickly to unfreeze the credit markets.

That sent stocks spiraling downward in the U.S., Europe and Asia, and drove investors to sink money into the relative safety of U.S. government debt. Fears about a global recession also caused oil to drop below $90 a barrel.

"The fact is, people are scared and the only thing they're doing is selling," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "Investors are cleaning out portfolios and getting rid of everything because nothing seems to be working."

The selling was so extreme that only 264 stocks rose on the NYSE - and 2,986 dropped. That's a telling sign considering the stock market is considered a leading economic indicator, with investors tending to buy and sell based on where they believe the economy will be in six to nine months.

In a new CBS News poll, 55 percent of Americans now say the economy is in very bad shape - the highest number ever recorded in the poll - and three out of four see the economy getting worse.

Major department stores like JC Penney, the Gap, Dillard's and Nordstroms all saw their September sales slip more than 5 percent according to early estimates, reports CBS News correspondent Anthony Mason.

As Wall Street reeled and global markets plunged, President Bush on Monday said the U.S. economy is going to be "just fine" in the long run. But he cautioned that the massive rescue plan will take time to work.

Bush said: "I believe that in the long run, this economy is going to be just fine." He said it will take the Treasury Department some time to enact a $700 billion plan to buy up troubled assets from financial firms so that credit will start flowing again to consumers.

As the dust settled after last week's bailout, a clearer picture of why the U.S. banking system malfunctioned has come into focus.

With its clients clamoring for safe investments with above average return, the big Wall Street investment houses bought up millions of the least dependable mortgages, chopped them up into tiny bits and pieces, and repackaged them as exotic investment securities that hardly anyone could understand, 60 Minutes' Steve Kroft reports.

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Watch "60 Minutes'" explanation of the U.S.'s shadow economy.

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Monday's stock trading extended what has been an exceptional stretch of volatility, in which triple-digit drops in the Dow are becoming almost commonplace; in the past week, the blue chips have fallen more than 1,100 points, or nearly 11 percent. This latest decline indicates that investors are becoming more convinced that the country is leading a prolonged economic crisis that is shifting to other nations.

"The market view is shifting from looking just at the misery of the financial sector to the global economy," said Georges Ugeux, chairman and chief executive of New York-based Galileo Global Advisors. "There are enough indication that two things are happening: The crisis is spreading to other sectors, and that it is becoming global."

Ugeux believes Monday's rout had little to do with any short-term problems facing the market, such as paralyzed credit markets or ailing financial companies. He believes that, regardless of the late-day rebound in stocks, "the reaction is clearly giving a downtrend and that there is a lack of confidence of investors into the future growth of the U.S. and the world economy."

The Dow fell as much as 800.06, then recovered in erratic trading to a loss of 369.88, or 3.58 percent, to close at 9,955.50, closing below 10,000 for the first time since Oct. 26, 2004. The Dow surpassed its previous record for a one-day point decline - 778, which the blue chips suffered a week ago when investors feared the bailout package might not pass Congress.

The Dow is down 30 percent from its peak a year ago this week, when it traded as high 14,198.09.

Broader indexes also tumbled. The Standard & Poor's 500 index shed 42.34, or 3.85 percent, to 1,056.89; and the Nasdaq composite index fell 84.43, or 4.34 percent, to 1,862.96. The Russell 2000 index of smaller companies dropped 23.49, or 3.79 percent, to 595.91.

In Asia, the Nikkei 225 closed 4.25 percent lower. Europe's stock markets also declined, with the FTSE-100 down 5.77 percent, Germany's DAX down 7.07 percent, and France's CAC-40 down 9.04 percent.

The global sell-off came after governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits. As the U.S. tries to repair its battered banking system, the German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG. And France's BNP Paribas agreed to acquire a 75 percent stake in Fortis's Belgium bank after a government rescue failed.

The Fed also took fresh steps Monday to help ease credit markets. The central bank said Monday it will begin paying interest on commercial banks' reserves and will expand its loan program to squeezed banks.

Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., said government intervention certainly might help. However, he believes investors are sensing that what's happening in the economy is a shift in the extent to which consumers and businesses take on debt, a change that will take years to play out.

"This is a global deleveraging of many economies," he said. "It might appear that you're going into the abyss where the economy grinds to a halt and the financial system goes into complete disarray. But, what the market is really reading here is that this is a global phenomenon, and when you delever like this, it is a process that takes a very long period of time measured in years, not quarters."

The anxiety was again obvious in the credit markets. The yield on the three-month Treasury bill fell to 0.43 percent from late Friday at 0.50 percent. Demand for bills remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Investors also moved into longer-term Treasury bonds. The yield on the 10-year note fell to 3.47 percent from 3.60 percent late Friday.

Anthony Sabino, a professor of law and business at St. John's University in New York, said the "market is displaying one of its worst traits with a herd mentality, and investors have an appetite for feeding on fear." He cautions that, while there are deep economic and financial problems being faced, it is still not a nightmare scenario.

"Most certainly, this is not the Great Depression of the 1930s, but (is like) the savings and loan crisis of the 1980s - and we bailed them out," he said. "Once people catch their breath, they'll see this is the proper analogy and this will breathe life back into banking institutions."

But, most analysts believe that there will be no quick fixes to the current financial crisis. Ryan Jacob, portfolio manager for the Jacob Internet Fund, said he's sensing the market might be getting closer to a short-term bottom but that problems for the economy likely will persist.

He said the passage of the bailout package, billionaire investor Warren Buffett's investment last week in General Electric Co. and even a skirmish between Wells Fargo & Co. and Citigroup Inc. over control of Wachovia Corp. are positive signs.

"We've had some positive anecdotal events in the last week so it's making me a little bit more confident," Jacob said. "These are all signs that make it more likely than not that we're trying to find a near-term bottom."

He's been hunting for bargains lately.

"We had had been a little bit cautious up until really about a month ago," he said. "Over the last few weeks we've been increasing our position levels."

Frederick Dickson, chief market strategist at D.A. Davidson & Co., believes investors are eager for any signs about the well-being of the economy. He doesn't believe that will happen until Wall Street overhauls its expectations for growth of corporate earnings and the overall economy.

"Wall Street at this point is shifting its attention from whether Congress was going to act on the emergency stabilization bill to the realization that the economy is slowing significantly faster than most analysts had expected," he said. "The downturn has shifted from first gear to about third gear in about two weeks."

[rjs1955]

1. How much have you heard of Bush%u2019s religiousness since he was re-elected in 2004? Barely a word, because he doesn%u2019t need it anymore for re-election. He is no more religious than the man-in-the-moon%u2026 never was, never will be, you sap-headed evangelical voters.
2. Do not think that the unemployment numbers being as bad now as after 9/11 is coincidence.
3. Bush/Cheney & Co. have sucked us as dry as possible by lowering taxes (as bait to go along), but then lowering earnings expectations by a much bigger margin to save business interests.
4. This way has continued to line the pockets of big business and the financial industry at our expense. Look at oil profits, Dubya/Darth%u2019s pet industry%u2026.
5. Bush/Cheney & Co. couldn%u2019t get any more from us by the methods that have worked since 2001, so they went the route which they have scared America into now%u2026 $700 billion to make YOU and ME pay for untold numbers of bad investments to keep the pockets lined in the business world. Meanwhile, WE the public will buy the toxic assets, and still let THEM decide what to do with them.
6. The public will never see a dime of return on any of the so-called toxic assets, ever%u2026. If you believe any word of the bailout plan, you need a shrink. Dems and Repubs were herded in by this horse-man-ure, not coincidentally just before an election. This bailout plan would never have passed except late in an election year and Dubya/Darth knew it.

[incog-nito]

Well, there goes McCain''s plan to "turn a page" on the economy and focus on personal attacks and character assassination.

[Keypinitreel1]

Well... Its going to be hard to change the course of debate off of this. This is going to trump all news all day. When it rain...it pours.

Its the economy stupid

[Keypinitreel1]

The 700 Billion dollar bailout bill does nothing to re-instill confidence and trust in economic institutions that used usurious methods to prop up balance sheets that were filled with lies.

Without trust there is no economy. The 700 Billion dollar bill may just be something to keep white collar criminals in business.

[drinuk]

Time the hidden agenda behind this financial fiasco was revealed, it has very little to do with mortgages, thats their excuse to a deluded and deprived nation.

ANYONE SEEN CHENEY ???

[inventagod2]

bu$HAMErica.

[usclimey]

700 billion dollars - going, going, GONE!

[closethippy1]

700 billion and I still cannot sell my condo. I bought it for 102k and now I can''t even get anyone to look at it for 65k.
I bet Bush is feeling sorry for the people who duped me into buying the condo and probably hates the guts of people like me for not being smart enough not to be fooled by his Wall Street buddies.
When I bought my condo I was told by some appraisers
that it was actually worth 110k. What a deal, eh?
But like a spoil brat he only knows how to blame others for his rebellious ways and will never accept responsability for his actions. And the same goes for every media pundit out there trying to spin this mess to blame the democrats for it.
I was lied to and I want out of my contract. Can''t the government do anything to help me out with the 700 billion they now have?

[ajaxtheleast]

* "WAR AND PEACE CRIME" *
How-To By George W. Bush

******* SUB-TITLE
"What Does It Take For a Republican
To lose The Presidency Of The
United States Of America?"

[freedomobama]

Thanks for all your help Bush.....NOT....

[smirk5]

I love the smell of a stock market plunge in the morning. It smells like....reality.

[smirk5]

At what DOW level will the internet stop working?

[Hybdiesel]

How can we have any trust, in this country, with bush and cheney still around ? If bush walked on water, he just might, get my attention. Impeach the rascals and put the fat cats in the slammer with OJ. Now for the people who like this mess,vote Mcbush and get yourself four more years.

[formrusmcsgt]

Why is the tightness of credit such a limiting factor?

Because most Americans do not save for their purchases but buy on credit instead.

[smirk5]

Trickle down works. I''ve been watching the DOW trickle down for quite awhile now.

[donevis-2009]

Now tell us again "W", Hows that bailout supposed to work?

[oscarez]

Bush and Company will be calling for $2 trillion more in bailout money before this week is over.

[formrusmcsgt]

So much for Republican economic wisdom which says "hands off and business will do just fine".

After the de-regulation of the savings and loans under Reagan and that debacle, we have yet more proof before us of the insanity of the Repub philosophy.

[antoniof123]

Looks like those idiot Republicans are still talking de-regulation oh wait now they are the party of regulations.

God this mess is all because of voodoo economics thank you Republicans it will be a generation before you ever see anything close to power again.

We should have listened to our parents they knew from McCarthy that this would happen I am glad my father and mother pass so they would not see the mistakes we maid.

Obama/Biden for a change in direction that we need.

[ontheleft]

Hard to say which is dropping faster. The Dow or McCain''s poll numbers?

[liberalme]

I love the smell of a stock market plunge in the morning. It smells like....reality.


Posted by Smirk5 at 10:42 AM : Oct 06, 2008

Apparently no one in Washington was listening when the market plunged below 700---

Well---these career politicians will hear us in November!

[marshall65]

And McCain wants to talk about Ayers.

[donevis-2009]

It''s hard to believe that Clinton was going to face impeachment for a BJ, and this Idiot gets away with looting our country. The Democrats in congress are push over cowards for not acting with the laws in their power. Oh thats right, George threatened to put them under martial law and shove the bill through himself if they didn''t pass it. YOU WIMPS SHOULD HAVE LET HIM. AT LEAST YOU WOULDN''T LOOK LIKE A PILE OF MUSHY MANURE TO YOUR CHILDREN. "God Speed USA"

[marshall65]

"Harry Reid said that this "OBAMA" plan for fatcats on Wall Street was going to be the answer to the problems in the financial markets?"....Nah, that empty headed logic won''t work. I think I remember Bush-Paulson-Bernanke pushing this. This IS the Republican plan supported by Democrats. They are all in the same boat on this one.

[aeasus]

Bush didn''t tell Wall Street the check is in the mail?

[oscarez]

In a free market system companies live and die on sales. The problem starts when a company sales on credit. Credit that the company provides using money the company borrowed and sales made to people that cannot pay for the products. Just look at Ford, GM, GE etc, etc. The FED does not have enough money nor can it borrow enough money to fix this problem. We are looking at a world depression.

[jaxspp]

Only someone with the wisdom and depth of knowledge who is as well read and thoughtful as Sarah Palin can help us now.

[generey]

$700B Bailout Fails To Ease Worries As Dow Jones Drops Below 10,000 For First Time In 4 Years.

NOW THAT is news I like to wake up to!!! ROFLMAO!!!
Voters will define themselves this year if any incumbents up for re-election are indeed re-elected. IF they retain office then the blame lies with the people. Simple as that. We will see.

[donevis-2009]

Apparently no one in Washington was listening when the market plunged below 700---
Well---these career politicians will hear us in November!

Posted by liberalme at 10:56 AM : Oct 06, 2008

Don''t count on the election too much, It''s been stolen twice. They''re going to be laughing till they have tears in their eye''s when they put the 72 year old maverick goat and the blond died brunette cheerleader in office.

[arlt1627]

Marshall65 at 11:00 AM ...caught on tape..Harry Reid called this BAILOUT plan was from Barack Obama on Thursday. August 25th at a noon conference on CNN, ABC, CBC and NBC along with C-Span. No hiding the FACTS...OBAMA BAILOUT PLAN has failed.

Posted by bellschotsch

This is pretty laughable considering that McCain suspended his campaign to go get this thing done.....couldn''t even get the Republicans to agree (which might have actually been good) and then he SIGNED OFF on this as well!!!

[jaxspp]

My only advice for the future would be to immediately sell the stock of any company that puts Dubya on its board of directors.

[jerr11]

Bush is going out in a blaze of glory.

Katrina was a tour de force of incompetency but this economic disaster tops it all!!

Vote McCain for more of the SAME!

The Cowboy from AZ will take over from the Cowboy from TX and turn this economic disaster into an economic Armageddon!!

[hotpaulie]

This is just a glimmer of Bush''s legacy. I can''t believe over half of you d u m b a s s e s voted for this guy...TWICE!

McCain and Obama were put in a difficult situation on this one...do nothing people suffer and do something people suffer...but the people suffering are always the same. The rich get richer...Reagan''s trickle down theory put in motion. So many of you Republicans think this guy was a saint.

[noloyalisti]

Well, I guess if it was going to happen, it is good the fascist Government of Pigs (GOP) couldn''t hold off the crash until the next selection.

Maybe now we can clean out the corporate Republicans and their failed Reaganomics once and for all. Time for change to progressive social programs for all. And time to tax the rich.

[arlt1627]

arlt1627 at 11:10 AM ...I agree, McCain should have never signed on to this "OBAMA" bailout plan.

Posted by bellschotsch

You''re still missing the point here! Who came up with the bailout plan.....oh wait. It was the PRESIDENT!! The slander is so not very subtle. Everyone is involved and responsible.

[incog-nito]

I''d like to see the market drop 10% or more today. Maybe the American people will have learned a lesson.

Or maybe not.

[ontheleft]

''We are looking at a world depression.''
Posted by Oscarez at 11:04 AM

The auto industry is already in a depression. The country has been in a recession starting about a year ago. Michigan & Ohio (among other places) even longer than that.

The nightmare scenario I see happening is the mounting bank failures are going to cause the FDIC to come to congress asking for hundreds of billions to cover them. Up to now they have been trying to conceal the extent of the problem (and not doing a very good job of that).

When people realize just how bad things are, that will start runs on the banks and then the whole system will collapse because the banks will not be able to cover their deposits. Its'' very possible people will be paid only pennies on the dollar for their FDIC insured deposits. The collapse in confidence in the system will cause a depression. Same thing that happened in 1929.

[arlt1627]

When Barack Obama becomes President he needs to call for an "Independent" counsel to investigate this whole mess. Lock-up all those CEOs and any lobbyist that gave money to any Congressperson or Senator. And lock-up those in Congress that took lobbyist money to look the other way on any "regulation" on Freddie Mac or Fannie Mae.

Posted by bellschotsch

Freddie & Fannie are a drop in the bucket of all of the other complexities that are involved in the crumbling market.

[closethippy1]

So, folks, how does Ralph Nader look to you now? Appetizing choice, isn''t he?

[pmaldona]

Tax the rich, re-distribute to the middle class (through tax cuts, universal health care, improve our infrastructure) Cut the reaganomics of free markets w/o regulation and oversight...OBVIOUSLY the republican model of keeping the rich, richer and building up the corporations of America does not have the "trickle down" effect people had hoped...Why would the wealthy want to share it? It''s all about GREED people!! It''s true, money is the root of all evil. Let''s get some democrats back in office and turn this thing around.

[daffy64]

Doin'' a hell of a job, Bushie!

[closethippy1]

BREAKING NEWS:

Wall Street Is Out Of Business. The US Doesn''t Exist Anymore.

[arlt1627]

arlt1627 at 11:18 AM ...I know that it was from Bush, that should have thrown-up a warning flag at the beginning. George "Idiot" Bush and Barack Obama on the same page. Stupid isn''''t?

Posted by bellschotsch

and McCain as well!! Amazingly stupid out of so many! How do you leave him out? other than you''re probably being paid to spew *** about Obama on here......

[txgrouch2006]

CONGRATULATIONS TO GEORGE W BUSH!

THE DOW HAS FALLEN BELOW 10,000 for the first time since Clinton''s speculative bubble made it rise above 10,000. The reckless Roaring Nineties has caused the return of the Depression.

He has now presided over the WORST ECONOMIC COLLAPSE SINCE THE GREAT DEPRESSION. But wait, it''s not over. This could become WORSE THAN THE DEPRESSION before it''s over.

The Dow is now at 9911. Hey, that 911 number seems to keep COMING UP under Bush.

[pmaldona]

"And lock-up those in Congress that took lobbyist money to look the other way on any "regulation" on Freddie Mac or Fannie Mae."

You mean like one of Mccain''s campaign advisers?? Hehe

"When people realize just how bad things are, that will start runs on the banks and then the whole system will collapse because the banks will not be able to cover their deposits."

This is true and the government will just pump more money into the system to keep everyone afloat, burdening us more..It''s sad so much about the market is derived by "speculation", at least gas finally dipped under $90 a barrel...

[incog-nito]

So, folks, how does Ralph Nader look to you now? Appetizing choice, isn''''t he?

Posted by closethippy1 at 11:21 AM : Oct 06, 2008

Nader? He''s been awfully quiet lately, considering all these things going on, don''t you think? Shouldn''t he be out there doing some talking? Maybe he''s concerned about his portfolio, just like congress.

[wassermd]

The U.S celebrated the demise of the Soviet Union in 1989 and rightly so. The reasons were that the Soviet system was corrupt, autocratic -- and most of all artificial. Almost twenty years later, the world economy is a house of cards and the same adjectives describe what Bush, Clinton, Wall Street, the SEC and Congress have done to this country.

Putin may be a dictator but he is leading his country and has a plan. So do the Chinese. What do we have -- Sarah Palin?

[txgrouch2006]

But there''s GOOD NEWS. The price of oil has fallen below $90/bbl.

Could this be the beginnings of DEFLATION???

BRING IT ON!!! I''ve got enough in my retirement account to pay off my mortgage and have some left over.

It will be like living on Costa Rica, but I won''t have to leave home.

[ubrew12]

negro_voter said: "In 1999 Clinton repealed that law, with the overwhelming support of almost all democrats and republicans. Everybody thought it was the right thing to do. Everybody was wrong. "

By 2003, it was hindsight that repealling Steagall was a bad idea. Hindsight is 20-20, as you have proven. The question is, if it was 20-20 hindsight in 2003, why wasn''t anything done about it. Who stayed blind on the issue for most of the 2000''s?

''Keep it real'' for yourself by answering that question, and you''ll know who to vote for this Fall.

[antoniof123]

In 1999 Clinton repealed that law, with the overwhelming support of almost all democrats and republicans. Everybody thought it was the right thing to do. Everybody was wrong.

Thats just keeping it real.

Posted by negro_voter at 11:24 AM : Oct 06, 2008

Let''s keep this real, Bill Clinton signed a bill that was written by a Republican controlled congress and it was a popular bill with America. So the blame does not lie with Bill Clinton it lies first with the author of the bill.

Let''s tell the whole story not just the story that is a good sound bite.