Updated from 2:50 p.m. EDT

Stocks on Wall Street essentially erased their session gains Friday afternoon following a vote by the House of Representatives to approve the Treasury Department's $700 billion bailout package.

The major indices lately were bobbing around the flatline. The Dow Jones Industrial Average, previously up as much as much as 313 points, was lately down 5.2 points at 10,478, and the S&P 500 was gaining 0.5 points at 1115. The Nasdaq added 1.4 points to 1978.

The financial-assistance bill, which creates a Troubled Asset Relief Program, or TARP, to take toxic assets off banks' balance sheets, passed the House 263 to 171.

"The importance of the rescue plan is that, over time, borrowers and lenders as well as financial markets and individual investors should gradually start shifting their outlook from what could go wrong to what could go right," wrote Michael Sheldon, chief market strategist at RDM Financial Group, in an email. Recent economic data shows the U.S. is in a recession, and the housing market remains troubled, he wrote. However, Sheldon sees the passage of the bill as mitigating further downside risks for the economy and financial markets going forward.

"Anyone who thinks that this is going to be a silver bullet is going to be sorely disappointed," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. He said the problems in credit markets and the economy have to work themselves out over a long period of time. Because of the global nature of the liquidity crisis, Roberts said, a solution will require a global coordinated effort among central banks. He said the bailout package is "not the seminal event that I think people are talking about. It's the first in a series of steps."

As investors awaited legislative aid, Wachovia ( WB) announced it has agreed to be sold to Wells Fargo ( WFC) in a $15.1 billion deal that Wells Fargo says will not require assistance from the Federal Deposit Insurance Corp. or any other government agency. The deal appears to negate another deal brokered by the FDIC Monday under which Citigroup ( C) agreed to acquire all of the banking subsidiaries of Wachovia. Citi is threatening legal action to stop the Wells Fargo deal and keep its own merger deal with Wachovia in place.

"Now you see a deal that's being done without being forced," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. He said that it's a positive for the market to see a bank merger based on valuation rather than the impulse on the part of the government to save a failing company.

Not all news from the financial sector was as rosy. Swiss bank UBS ( UBS) said it would cut 2,000 jobs as part of its reorganization efforts.

Insurance firm AIG ( AIG) said it would sell several of its business segments in an effort to pay back an $85 billion loan from the government.

The Wall Street Journal reported that Washington Mutual CEO Alan Fishman won't stay on at JPMorgan Chase ( JPM), which acquired WaMu after it failed on Sept. 25.

In other board shakeups, mortgage packager Fannie Mae ( FNM) 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) may merge its investment banking unit with Morgan Stanley ( MS) operations in Japan.

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

In the technology arena, Hewlett-Packard ( HPQ) may, according to a report in the Journal, be gearing up to release a smartphone.

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.