Shares Fall Sharply as Wall Street Awaits Bailout Details
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Tuesday, September 23, 2008
NEW YORK, Sept. 22 -- Stocks fell sharply Monday as investors grew nervous about the government's plan to buy $700 billion in banks' mortgage debt.
The Dow Jones industrial average fell 372.75, or 3.27 percent, to 11,015.69. The retreat followed the Dow's best two-day point gain since March 2000. The Standard & Poor's 500-stock index, a much broader indicator, fell 47.99, or 3.82 percent, to 1207.09, and the Nasdaq composite index fell 94.92, or 4.17 percent, to 2178.98.
The credit markets were still uneasy but not frantic, as they were last week. The dollar skidded lower, contributing to oil's surge.
Bush administration officials and congressional leaders have been meeting on the rescue plan, the thrust of which congressional leaders have endorsed. Many market observers are hoping for details to emerge by midweek; delays could weigh further on investor sentiment.
"This government opening of the checkbook -- it's a stopgap measure that will calm people and help us buy a little bit more time, but ultimately what we need to see is more confidence," said Rob Lutts, chief investment officer at Cabot Money Management in Salem, Mass.
While investors tried to gauge the effect of the government's lifeline, they also were absorbing more rapid changes in the banking sector. Morgan Stanley said it was working to sell up to a 20 percent stake to Mitsubishi UFJ Financial Group, Japan's largest bank.
The announcement came after the Federal Reserve on Sunday granted Morgan Stanley and Goldman Sachs, Wall Street's last two major investment banks, approval to change their status to bank holding companies. The move will allow the companies to set up commercial banks that can take deposits, significantly bolstering the resources of both. However, they also will be subject to more regulation.
Oil's rise of $16.37, to settle at $120.92 a barrel, came as investors snapped up supplies to cover the October contract, which expired at the end of Monday's session. The contract's pending expiration helped inflate crude's price.
Movers
J.P. Morgan Chase lost$6.25, to $40.80.
American Express fell $3.11, to $37.29.
