Bailout uncertainty sinks Wall Street

NEW YORK - Stocks tumbled on Monday as investors worried a US$700 billion bailout for the financial sector may not resuscitate a slumping economy, while a record spike in oil prices renewed concern about consumer spending.

Banks, home builders and big manufacturers were among the biggest decliners as negotiations over the government's rescue plan to mop up bad mortgage debt on banks' balance sheets heated up in Washington.

A Wall Street analyst downgrade hit shares of JPMorgan Chase, the No 3 US bank, which fell 13.3 per cent, making it the top drag on both the Dow and the S&P 500. Wells Fargo dropped 11.6 per cent.

The S&P financial index shed 8.5 per cent, while an index of airline stocks fell 9.4 per cent.

Monday's market swoon wiped out nearly all the gains seen on Friday when the bailout announcement sparked Wall Street's best one-day advance since 1987. Only 2 of the Nasdaq 100 stocks end higher.

Investors cited uncertainties about the rescue plan's details and concern about whether it would provide a lift for the US economy, which many fear is already in recession.

The Dow Jones industrial average dropped 372.75 points, or 3.27 per cent, to 11,015.69. The Standard & Poor's 500 Index slid 47.99 points, or 3.82 per cent, to 1,207.09. The Nasdaq Composite Index fell 94.92 points, or 4.17 per cent, to 2,178.98.

The Bush administration is pressing Congress to approve one of the costliest US bailouts for financial companies since the Great Depression, but debate about the particulars of the plan continues on Capitol Hill.

Source: Singapore Business Times - 23 Sep 2008