Stocks Dip as Investors Await Bailout Vote
Thursday, October 2, 2008
NEW YORK, Oct. 1 -- U.S. stocks flirted with gains Wednesday but finished lower as investors waited for Congress to decide the fate of the $700 billion bailout proposal and considered the economic threats that might remain even if the legislation passed.
The Dow Jones industrial average of 30 blue-chip stocks, after rising more than 31 points at its session peak, closed down 19.59 points, or 0.2 percent, at 10,831.07. The broader Standard & Poor's 500-stock index dropped 3.68 points, or 0.3 percent, to 1161.06. The Nasdaq dropped 22.48, or 1.1 percent, to 2069.40.
Financial stocks bucked the downward trend Wednesday. Shares of Citigroup, Bank of America, J.P. Morgan Chase and smaller banks such as National City and Huntington Bancshares all rose as investors bet Congress would pass a reworked bailout bill.
"When that happens, we move past the end-of-the-world, apocalyptic scenario, and then we move into the scenario of a recessionary environment," said Stephen Wood, senior portfolio manager for Russell Investments.
The Dow was led lower by IBM, which fell 5.8 percent, to $110.13, on concern that the computer company, which often helps customers finance purchases, might need bigger reserves for bad debt.
General Electric fell nearly 4 percent, to $24.50, even after Warren E. Buffett poured $3 billion into the conglomerate.
Concerns about investment losses knocked down shares of insurers Genworth Financial, down nearly 15 percent, to $7.36, and MetLife, down 14 percent, to $48.15.
The only S&P 500 stock to fare worse was Sallie Mae, which plunged 32 percent, to $8.35. The Reston-based student loan company makes money by charging a higher rate than it pays to borrow. Borrowing costs for companies are rising because of the ongoing credit crunch.
After a third quarter more notable for the stock market's see-sawing than for its overall declines, investors were hesitant to make predictions for the fourth quarter.
"You have to have data and information in order to make a forecast," Wood said. "There's basically no information, and when information does exist, it's of exceedingly poor quality."
Investors pulled $22 billion from U.S. equity mutual funds last month, compared with $2 billion the previous month, according to TrimTabs Investment Research, which analyzes U.S. stock market liquidity. At the same time, $24 billion was withdrawn from bond funds, the largest extraction in a single month.