Despite the Bailout Bill, a Steep Slide
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U.S. stocks fell last week by the most since the September 2001 terrorist attacks as the passage of a massive financial-market rescue package was overshadowed by worries that tightening credit markets will prolong an economic slowdown.
The Standard & Poor's 500-stock index dropped 9.4 percent, to 1099.23, almost a four-year low. The Dow Jones industrial average fell 7.3 percent, to 10,325.38, and the Nasdaq composite index declined 10.8 percent, to 1947.39.
General Electric slid 15 percent as it sold shares at a discount to raise money to cover losses. AK Steel Holding led steelmakers to their biggest weekly drop in at least 13 years on speculation that the slowdown will curb demand for raw materials. Hartford Financial Services Group plunged 52 percent amid concern that insurers' investments are falling in value.
"Banks are starting to choke off credit to even their best customers," said Matthew Kaufler, a money manager at Clover Capital Management. "If it persists, it's going to have broad ramifications for the economy as a whole."
Stocks fell Friday even as the House of Representatives approved the White House's plan to shore up banks and President Bush signed it into law. The Dow industrials tumbled 777.68 points on Sept. 29, the biggest point drop in the index's 80-year history, after the House rejected a different version of the legislation.
The declines this week extended the S&P 500's slide for 2008 to 25 percent, led by financial companies after credit losses stemming from the nationwide drop in home prices exceeded $588 billion.
A benchmark for banks' cost of funds, the London interbank offered rate for three-month loans, jumped Friday as lenders hoarded cash.
Government data released Friday showed that U.S. employers cut jobs for a ninth straight month in September.
Yields on Treasury securities tumbled as traders increased bets the Federal Reserve will lower interest rates at one or both of its next two meetings on Oct. 29 and Dec. 16. The benchmark 10-year note's yield declined to 3.60 percent from 3.85 percent.
The Treasury will auction $26 billion of three-month bills and $27 billion of six-month bills on Monday. They yielded 0.71 percent and 1.23 percent, respectively, in when-issued trading. The Treasury will sell one-month bills Tuesday.
-- Bloomberg News
