U.S. Stocks Fall Amid Bailout Uncertainty
NEW YORK (MarketWatch) -- Stocks remained lower -- even as they came off earlier lows -- Wednesday, with markets entering the first session of the fourth quarter still on edge over whether Congress will pass the controversial $700 billion financial-sector bailout package.
In a sign of the market's concerns over the credit crisis and its impact on the U.S. and global economy, energy, materials and industrial stocks fell the most in the broad market.
"Over the past several weeks, investors have grown increasingly concerned about the prospects for the U.S./world economy and have become more uneasy in the face of continuing lack of liquidity and the ongoing credit crisis," said Bob Doll, global chief investment officer at BlackRock.
A national manufacturing survey also revealed weaker-than-expected conditions, suggesting the economy is already in recession.
"There's no downplaying these dismal results," said Doug Porter, senior economist at BMO Capital Markets, of the manufacturing data. "And it is not just a U.S. concern, as there were some similarly weak numbers out of Europe this morning."
The Dow Jones Industrial Average was down 43 points, or 0.4%, at 10,807, rebounding off an earlier low of 10,631. Seventeen of the Dow's 30 components traded lower, led by the likes of Alcoa Inc. , Caterpillar Inc. and IBM .
Shares of General Electric Co. fell 7.5%, recoiling after Deutsche Bank cut its price target on the blue-chip stock.
"Our adjustments largely reflect deterioration at GE Capital -- driven by tighter credit markets, asset shrinkage and debt paydown," wrote analyst Nigel Coe.
Dow component Exxon Mobil rose 0.7%, bucking a mostly negative trend in energy shares as crude-oil prices slumped more than 2%.
Earlier Wednesday, the Energy Department reported U.S. petroleum inventories rose in the latest week, further pressuring crude-oil futures, off more than 2% and back below $100 a barrel.
Gold futures continued to rise on safe-haven demand, after gaining 5.5% in September.
The dollar was slightly higher, and government bonds were stronger.
Kicking off the release of monthly auto sales reports, Ford Motor Co. said its U.S. sales slumped 34.6% in September. Ford's shares slumped well below $5.
The S&P 500 index dipped 7.7 points, or 0.7%, to 1,158. By sector, energy led the way lower, slumping 3.3%, followed by industrials, down 2.3%; materials, down 1.5%; and technology, down 1.3%.
Meanwhile, the Nasdaq Composite lost 19 points, or 1%, to 2,072.
Trading volumes showed 630 million shares exchanging hands on the New York Stock Exchange and 405 million trading on the Nasdaq. Declining issues topped gainers by 9 to 7 on the NYSE and by 2 to 1 on Nasdaq.
U.S. stocks surged Tuesday -- though they didn't recover fully from Monday's jaw-dropping tumble -- on hopes some form of the economic rescue bill will be passed in Congress after an initial defeat Monday in the House of Representatives.
The Senate's scheduled to vote Wednesday evening on its version of the historic $700 billion rescue package, two days after the House's stunning rejection of the original legislation.
One of the tweaks to the legislation going before the Senate will have the deposit insurance from the FDIC raised to $250,000 from $100,000, the New York Times reported.
"Given the political capital invested by all sides, we think that ultimately a deal will be reached," said Nick Nelson, a UBS strategist in London.
The interest-rate debate may also be back in the spotlight as Goldman Sachs analysts say they're now expecting more rate cuts from the Federal Reserve, as well as easing by the European Central Bank.
Weakening economy
Also grabbing investors' attention, the Institute of Supply Management's manufacturing index for September fell at a much faster pace than had been expected -- one of he clearest signs to date that the economy has entered recession territory.
The ISM index fell to 43.5% from 49.6% in August, much lower than the 49.6% that had been expected by economists surveyed by MarketWatch.
Separately, the ADP employment report showed the private sector lost 8,000 jobs in September. Economists had been looking for the ADP index to fall 65,000 after it lost a revised 37,000 in August.
The ADP index has shown a much stronger job market this year than the government's nonfarm payroll report has. Economists expect a loss of 103,000 in nonfarm payrolls when the Labor Department's data are reported Friday.
Rio Tinto rose after Australia's competition regulator approved BHP Billiton's proposed hostile takeover. The deal still needs approval in Europe and by shareholders.
By Nick Godt