Updated from 12:49 p.m. EDT
Stocks were sulking Thursday, as traders waited for the House of Representatives to follow up on the Senate's recent passage of a $700 billion
for financial firms.
Dow Jones Industrial Average
dropped 306 points to 10,525, and the
was losing 35 points to 1126. The
was slipping 70 points to 1999.
After the close of Wednesday's trading, the Senate passed the bailout bill with a 74-25 vote. The House of Representatives had rejected an earlier version of the proposal on Monday, and the
responded with one of its worst performances in recent memory. Among other revisions, the bill passed by the Senate included $110 billion in tax incentives aimed at fostering economic growth.
The House is expected to vote on the revised package Friday.
"I think, honestly, the Senate was kind of a foregone conclusion," said Michael Church, portfolio manager at Church Capital Management. He said that the real hurdle for the rescue package has been in the House, where local interests are holding lawmakers back from passing the bill. "You look at some of the stuff that got thrown on that thing, you have to shake your head and say that some of these guys are being bought," he said. Church also said that sentiment is so awful that a short-term surprise rally isn't out of the question.
Chris Johnson, CEO and chief investment officer at Johnson Research, said he's confident the bill will pass. He said it appears House lawmakers revised their opinion of the bill after the stock market dropped on Monday. The bill is also "aimed more at helping the common person, at least from a PR perspective," he said.
In an attempt at offering additional support to the stock market, the
Securities and Exchange Commission
extended through Oct. 17 a ban on short sales of financial stocks. The original ban had been slated to expire today.
Meanwhile, Swiss bank
announced it would net a small third-quarter profit. Such an achievement would break a four-quarter losing streak for
Bank of America
, which agreed on Sept. 14 to buy
, said Merrill Chairman and CEO
will join BofA as president of global banking, securities and wealth management in the combined firm. Current president of global corporate and investment banking Brian Moynihan at BofA will remain in a newly created position, the company said.
Already-tight debt markets were becoming even more restrictive. Three-month Libor, a measure of the interest rates banks charge one another for short-term loans, reached 4.21%, a level not seen since Jan. 11.
The commercial-paper market was also reflecting investor skittishness. The
reported that commercial paper outstanding dropped by $94.9 billion in a week to $1.607 trillion, as borrowers had trouble finding buyers for the securities. This week marks the third straight week of declines in commercial paper, a type of short-term debt, and takes the total decrease to $208 billion.
reported that private equity firm
Kohlberg Kravis Roberts
, together with French electric company
were working on a
In the technology space,
said Japanese firm
was in discussions with data-storage company
about a potential sale of
announced a $12.2 billion common-stock offering priced at $22.25 a share.
, CEO of
, said that the automakers would continue to face a tough global market until 2010 and added that his company would not be filling for bankruptcy.
Several companies reported earnings between Wednesday's and Thursday's sessions. Agricultural products maker
said it made a profit that surged to $2.65 a share from 69 cents year over year but nonetheless missed analyst estimates.
reported declining profit and warned that 2009 would be a tough year.
, meanwhile, swung to a quarterly loss due to restructuring charges.
As expected, the European Central Bank kept its interest rate unchanged at 4.25% amid a dual threat of high inflation and an economic slowdown.
The day's economic data offered further reason for pessimism. The Department of Labor said that initial jobless claims for the week ended Sept. 27 rose by 1,000 to 497,000, the highest unemployment rate since 2001.
The Census Bureau reported that factory orders declined 4% in August, a sharp drop-off from a 0.7% increase in July and a weaker performance than the 2.9% decline anticipated by economists.
As investors look beyond the bailout package, they're turning again to the broader economy, said Chris Johnson. He added that today's unemployment data is hurting expectations for tomorrow's nonfarm payrolls report. A bottom in the market will take place over a very long term and won't be the type of "V" recovery everyone likes, he said.
In commodities, crude oil was down $3.71 to $94.82. Gold was losing $41.40 at $845.90.
Longer-term U.S. Treasury securities were higher in price. The 10-year was up 22/32 to yield 3.65%, and the 30-year was gaining 24/32, yielding 4.17%. The dollar was stronger against the euro and pound but falling vs. the yen.
Overseas, European exchanges were declining, while
. The FTSE in London and the DAX in Frankfurt were trading lower. The Hang Seng in Hong Kong finished on the upside, while Japan's Nikkei ended its session with losses.