Dow Plunges 777 as House Rejects Bailout

Updated from 4:10 p.m. EDT

Stocks on Wall Street wallowed in a blood bath Monday after the House of Representatives voted to reject the Treasury Department's proposed aid package for the financial sector.

The surprise vote tally stunned traders on Wall Street. The Dow Jones Industrial Average plummeted 777.68 points, or 7%, to 10,365.45. The S&P 500 sank 106.59 points, or 8.8%, to 1106.42. The Nasdaq lost 199.61 points, or 9.1%, to 1983.73.

At the end of the day, the Dow suffered its worst single-day point drop ever and its worst single-day percentage decline since Sept. 17, 2001. Each of the 500 stocks that make up the S&P 500 trading Monday, finished the day with losses; that is except for Campbell Soup (CPB Quote).

The $700 billion proposal, formally presented last week by Treasury Secretary Henry Paulson, failed to garner sufficient votes to make it through the House of Representatives. The package, which would have set up a facility to use government money to buy troubled assets from financial firms, was voted down with an initial tally of 205 votes for the bill to 228 against. The controversial piece of legislation had earlier been expected to make it through. A total of 218 votes were required to pass the bill.

The Dow, which was already losing some 300 points ahead of the vote, plunged another 400 points after news of the surprise vote results spread. The sharp decline in the major indices is "strictly in response to Congress not passing the TARP," said Michael Strauss, chief economist and strategist at Commonfund. "The question is, are they going to get back together and try to get something through?" Strauss said the general expectation is that Congress will have to reconvene and try to pass some legislation to help the credit markets.