Stocks Lose Ground as Doubts Grow About Government's Rescue Plan
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Wednesday, September 24, 2008; Page D05
Stocks sank yesterday as lawmakers questioned the Bush administration's financial rescue package.
Some investors have grown nervous that resistance to the $700 billion bailout package could prolong debate about the measure, while others are in a holding pattern as they await more details, analysts said. Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. got a chilly reception from the Senate banking committee yesterday as they explained the need for the measure, which would allow the government to buy bad mortgage debt off struggling financial firms.
"You need to have financial stability and financial markets working properly for the economy and the housing market to have a chance to recover," Bernanke said. "My interest is solely for the strength and the recovery of the U.S. economy. I believe if the credit markets are not functioning, that jobs will be lost, the unemployment rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way, no matter what other policies are taken."
After falling more than 372 points Monday, the Dow Jones industrial average had a late afternoon sell-off yesterday, closing down 161.52 points, or 1.47 percent, at 10,854.17. The Nasdaq composite index dropped 25.65 points, or 1.18 percent, to 2153.33, while the Standard & Poor's 500-stock index was off 18.87, or 1.56 percent, to 1188.22.
"The financial community is now in the unenviable position of having their future, in part, determined by the hearings on the Hill and the negotiations behind the scenes between the Congress and the administration," said Joseph Brusuelas, chief economist for Merk Investments.
After shooting up Monday, oil prices retreated yesterday. The price of oil to be delivered in October surged more than $25 a barrel in trading Monday before falling back. The October contract expired yesterday, and the price of oil for delivery in November fell $2.76, to $106.61.
After plunging 2.2 percent against the euro Monday, the dollar regained some ground yesterday. "The dollar is not falling further. That is positive," said Tom Sowanick, chief investment officer at Clearbrook Financial.
