news-dow_drops_778_points_as_bailout_bill

MSN Money - By Charley Blaine and Elizabeth Strott, 29 September 2008
Dow drops 778 points as bailout bill fails

Panic selling sets in after the House narrowly rejects the $700 billion plan to bolster the financial system. Japanese stocks open lower, U.S. stocks may open slightly higher. Energy prices fall. Apple leads tech shares lower.

Stocks suffered an historic and massive sell-off today after the House of Representatives narrowly failed to approve a $700-billion rescue plan for the U.S. financial system.

The Dow Jones industrials fell 778 points, or 7%, to 10,365. It was the biggest point loss ever for the blue-chip index and the biggest percentage loss since Sept. 17, 2001, the first day of trading after the Sept. 11, 2001, terror attacks.

The Standard & Poor's 500 Index suffered its biggest one-day point loss and its biggest percentage loss since the October 1987 market crash.

The Dow and S&P 500 closes were their worst since June 2005.

The Nasdaq Composite Index slumped 200 points, or 9.1%, to 1,984, its first close under 2,000 since September 2004.

Traders booed on the floor of the New York Stock Exchange as the closing bell rang. For good reason: The slump wiped out The selling wiped out some $1.2 trillion in market capitalization from the U.S. stock market.

Stocks around the world are likely to be volatile again on Tuesday. Japan's Nikkei 225 Index was down 4% to 11,275 in early trading. Indexes in New Zealand, Australia and Korea were also down more than 4%.

The problem is that many investors are selling stocks, preferring the safety of cash.

But here's some good news: futures trading on U.S. stock indexes indicate a small uptick in U.S. stocks on Tuesday.

The stock market's plunge reflected bigger problems in credit markets where banks didn't want to lend each other. Traders repeated stories about businessmen who said they might not be able to make payrolls on Wednesday unless banks were willing to lend money on even a 24-hour basis.

"There's a monster amount of fear out there. This is global contagion. It's no longer just the United States," Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, N.J., told Reuters.

Congress has to come up with a new plan, "or the damage is unimaginable," Henry Herrmann, CEO of mutual fund company Waddell & Reed, told Bloomberg News.

With today's close, the Dow was down 21.9% on the year and down 26.8% from its Oct. 9, 2007 high.

The S&P 500 was off 24.7% on the year and 29.3% from its Oct. 9 high. The Nasdaq was off 25.2% and down 30.6% from its Oct. 31, 2007 high.

As of today, the Dow is off 10.2% for September.

If that level holds on Tuesday, it would be the worst September performance for the blue-chip index since September 2002, when the index fell 12.4%, and the seventh-worst September since 1929.

The Dow's biggest losses,
DateDow closeChg.% chg.
September 29, 2008   10,365.45    -777.68   -6.98
September 17, 2001    8,920.70    -684.81    -7.13
April 14, 2000             10,305.77 -617.78   -5.66
October 27, 1997         7,161.15   -554.26   -7.18
August 31, 1998          7,539.07   -512.61   -6.37
October 19, 1987        1,738.74    -508.00   -22.61
September 15, 2008    10,917.51   -504.48   -4.42
September 17, 2008    10,609.66   -449.36   -4.06
March 12, 2001           10,208.25   -436.37   -4.10
February 27, 2007       12,216.24   -416.02   -3.29

A panic sell-off
The sell-off was a clear case of panic, something not seen since the 1987 crash and 9/11. It was set off by complete surprise by traders and investors that the bill, crafted over the weekend, would fail.

The only source of strength in the market was gold and short-term Treasury bills. Gold closed up $5.90 or 0.7% to $894.40 in New York. The yield on the 30-day Treasury bill fell to 0.07% as investors were far more interested in simple safety than actual return.

Crude oil, meanwhile, fell 9.8% to $96.37 a barrel in New York on expectations that a slowing U.S. economy would depress demand for gasoline and other fuels.

No one on Wall Street had a clue today where the market will bottom. The first order of business is to get a rescue plan passed that gives financial markets around the world some confidence.

Expect more volatility in U.S. markets in the next few days, although volume is likely to be lower because of the Rosh Hashanah, the Jewish New Year. Asian markets, which fell on Monday, are likely to be sharply weaker on Tuesday, as will markets in Europe.