Updated from 3:22 p.m. EST
Stocks in New York sold off sharply Tuesday, continuing to slide into the afternoon, as holes in the "Financial Stability Plan" left investors disillusioned and the long-awaited Senate passage of the economic stimulus plan did little to excite the Street.
Dow Jones Industrial Average
finished down 381.99 points at 7888.88, and the
fell 42.73 points to 827.16. The
was off by 66.83 points at 1524.73.
The Dow was a sea of red, as all 30 Dow stocks were losing ground, with
Bank of America
in the lead, shedding 18% and
provided one promising storyline for the day, a bright spot amid earnings and layoffs news from
and data showing U.S. wholesalers cut back on their inventories in December by the largest amount in nearly 17 years.
But the spotlight was on the unveiling of Treasury Secretary Geithner's
financial bailout plan, which had previously enticed the market with the possibility of surprise provisions, shaking out some short positions and helping to inspire a rally late last week. But today, it just failed to impress, said Matthew Smith, president of Smith Affiliated Capital.
Among other things, the
will establish a Public-Private Investment Fund in conjunction with the
, the Federal Deposit Insurance Corp. (FDIC), and the private sector, Geithner said. But it wasn't quite the "bad bank" concept -- a creation to eat up toxic assets that are derailing banks' balance sheets -- that had made water cooler talk.
"The issue is valuation, it doesn't matter whether you're selling a house or toxic assets,
the bank or owner has a number in their head and the reality is the market is nowhere near that," says Smith. The question is who's going to be evaluating the assets, and how will they reconcile the current and appropriate value, he says.
Geithner gave "a vague private/public sector investment scheme that did not talk about the pricing of these assets and one that will rely on the government to tacitly price the debt by providing public sector financing," said Michael Pento, chief economist at Delta Global Advisors.
The new program could involve putting public or private capital side-by-side and using public financing to leverage private capital on an initial scale of up to $500 billion, with the potential to expand up to $1 trillion, according to the Treasury Department.
Pento asks, "Will the government backstop the private sector purchases? If so, at what price? It's hard to believe the private sector will participate without government guarantees on the debt."
In stimulus news, the Senate passed the $827 billion bill by a 61-37 vote. Congress hopes to have the bill ready for President Obama's signature by the end of this week, as next week it will be in recess.
Earnings season continues to wrap up, as Swiss banking giant
reported a $6.9 billion fourth-quarter loss and a $16.8 billion loss for 2008, and said its investment bank
will eliminate 2,000 more jobs by the end of the year.
In other corporate news, struggling American automaker
it will reduce salaried workers from 73,000 to 63,000 this year, with about 3,400 of those job cuts coming in the U.S.
Bucking the layoff and cost-reduction trends,
CEO Paul Otellini said the company would spend $7 billion over the next two years -- its largest investment ever for a new manufacturing process -- to build manufacturing facilities in the U.S. to deploy technology used to build faster, smaller chips that consume less energy.
Meanwhile, biotech icon
has asked Swiss pharma Roche
to pay $112 a share to acquire the 44% of the biotech company that it doesn't own, according to a recent SEC filing. The request is well above Roche's $89-a-share offer in July and scoffs at Roche's hostile tender offer for $86.50.
ElsewhereTuesday, Federal Reserve Chairman Ben Bernanke was testifying in front of the House Financial Services Committee hearing, stating that many of the current measures are starting to have an effect and that the feedback he has received so far has often been positive.
Also, more economic data offered yet another reminder of the state of the economy, as U.S. wholesale inventories fell by a record 1.4% in December, after an 0.9% drop a month prior, and surpassing expectations for a decline of 0.8%, according to the Commerce Department.
The decline, representing the fourth consecutive monthly drop, was the greatest since records began in January 1992.
In afternoon trading, crude oil was rising 45 cents to $40.01, while gold was up $21.40 to settle at $914.20.
Longer-dated Treasuries were recently rising; the 10-year note was recently up 1 04/32 to yield 2.9%, the 30-year was adding 1 30/32, yielding 3.6%.
The dollar was recently stronger against the pound and euro, and weaker against the yen.
Stocks were mixed overseas. In Europe, the FTSE in London and DAX in Frankfurt were lower. In Asia, Japan's Nikkei lost ground, but Hong Kong's Hang Seng closed higher.