Wall Street Sells Off Despite Bailout Approval

In other board shakeups, mortgage packager Fannie Mae (FNM Quote) announced that former CEO Daniel Mudd will not be keeping his seat on Fannie's board.

Meanwhile, several media reports suggested that Japanese firm Mitsubishi UFJ (MTU Quote) may merge its investment banking unit with Morgan Stanley (MS Quote) operations in Japan. Mitsubishis shares gained 1.8% at $8.45, and Morgan Stanley jumped 3.1% to $23.92.

Elsewhere, private equity firm Blackstone (BX Quote) bought a $600 million stake in China National BlueStar, according to a report by Bloomberg. Blackstone climbed 5.1% to $15.34.

In the technology arena, Hewlett-Packard (HPQ Quote) may, according to a report in the Journal, be gearing up to release a smartphone. Shares slumped 0.6% to $43.

As for economic data, the Department of Labor reported that the September unemployment rate remained at 6.1%, the same rate as in August and nonfarm payrolls decreased by 159,000, the largest drop since March 2003 and twice the decline feared by economists. The average work week declined to 33.6 hours from 33.7 in August.

Although economists' estimates imply that the employment number would hurt sentiment, Sparks of Schaeffer's said that judging by behavior in futures markets, the market's expectations may have been lower than those of economists. "Maybe it was one of those things where the unspoken fear was much greater than where the consensus number was," he said.

The dismal employment numbers were spurring speculation that the Fed would soon cut its target interest rate. Futures markets were pricing in 100% odds of a rate cut before the Fed's next meeting on Oct. 29.

Although the Fed probably would prefer not to lower rates, it may have to, said Doug Roberts of ChannelCaptialResearch.com. "I think we're talking at least 25, maybe 50 basis points." He said that increased weakness in European markets is contributing to strength in the dollar, which gives the Fed more room to loosen monetary policy.

The Institute for Supply Management's services index came in at 50.2, slightly ahead of economists' projections for a read of 50.

In commodities, crude oil lost 9 cents to settle at $93.88. Gold was gave back $11.10 to $833.20.

Longer-dated U.S. Treasury securities were falling in price. The 10-year was losing 32/32 to yield 3.75%, and the 30-year was down 1-10/32, yielding 4.23%. The dollar was higher vs. the yen but weakening against the euro and pound.

Across the seas, European exchanges, such as London's FTSE and Frankfurt's DAX, were largely trading higher. Asian indices, like the Nikkei in Japan and Hong Kong's Hang Seng, meanwhile, closed with losses.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting