I’m actually quite surprised. The stock market in a panic. I wonder whether Paulson and Bernanke have a Plan B. Jamie Galbraith outlined a good interim idea (needs tweaking but has merit) in the Washington Post last week. Hope someone paid attention.
U.S. stocks plunged and the Standard & Poor’s 500 Index tumbled the most since 1987 after the House of Representatives voted down a $700 billion plan to rescue the financial system.
Sovereign Bancorp Inc. tumbled 66 percent and National City Corp. slid 52 percent, leading financial shares in the S&P 500 to an 11 percent slide. The MSCI World Index of 23 developed markets sank 6 percent, the most since its creation in 1970
“It’s pretty much a nightmare,” said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $5 billion in San Antonio. “This is the worst we’ve seen it since the credit mess started. Until we know exactly why they didn’t pass it, we’re going to be selling off for a while.”
The S&P 500 sank as much as 87.02 points, or 7.2 percent, to 1,125.99. The Dow Jones Industrial Average slid 631.13, or 5.6 percent, to 10,512 at 2:09 p.m. The Nasdaq Composite Index declined 148.4, or 6.8 percent, to 2,034.94.
The S&P 500 extended last week’s 3.4 percent retreat after the House voted 205 to 228 against the measure to authorize the biggest government intervention in the markets since the Great Depression. The crisis that began with bad home loans to subprime borrowers is threatening to push the economy into a recession as consumers lose confidence and banks cut back on lending.
Some quick carnage recaps:
Financial shares now diving Ed Harrison
VIX Spikes – But It’s Been Worse Bill Luby, Seeking Alpha
Will add to the list. Looking for credit market sightings.
Update 3:00 PM: With being a member of the poor unwashed, I get my data feeds on delay. Yen up to 104, Brent crude is $93 and change, and this article Bloomberg on other reactions:
The Standard & Poor’s 500 Index fell as much as 7.2 percent, the most since Oct. 26, 1987, as 490 companies declined. The MSCI World Index of 23 developed markets sank 5.9 percent, the steepest decline in the measure’s 38-year history. Trading on Brazil’s Bovespa was halted after the main stock index plummeted 10 percent. The euro and the pound sank and bonds rose as governments raced to prop up banks infected by growing U.S. mortgage losses. Crude futures tumbled more than $11 a barrel.
“This was sold as the last straw, the thing that was going to fix everything and it looked like it was going to pass,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “There’s disappointment that we have this continued stress in the financial sector.”
The MSCI World Index of 25 developed markets lost 73.86 points to 1,176.51, giving it the steepest intraday percentage retreat since its creation in 1970. The MSCI All-Country World Index of 48 nations lost up to 6 percent, the most in its 21-year history. The S&P 500 retreated 74.93 points to 1,138.08 at 2:29 p.m. in New York, and earlier touched a four-year low of 1,125.99. Europe’s Dow Jones Stoxx 600 Index sank 5.5 percent to 251.43, the lowest since January 2005. The MSCI Asia Pacific Index fell 2.1 percent.
The problem is that the focus is on the equity markets are doing, which is highly visible, when the most important reaction is what bank funding rates and credit default swap spreads are doing. Any inputs there appreciated.
Update 3:10 PM: Here is the take from Clusterstock: “Market To Feds: Your Bailout Wouldn’t Have Worked Anyway“:
What’s happened in the past hour?
The House blocked the Bailout Bill (a big surprise)
The market plunged 400 points from where it had been trading
The market then recovered, and is now down only about 200 points from where it was trading prior to the House announcement.
This suggests that the current Bailout itself was worth only about 200 DOW points in the market’s eyes.
And it’s not just the DOW: The credit markets haven’t moved much, either.
This morning, when it seemed the bailout would sail through Congress, the TED Spread spiked up from Friday’s already elevated levels (the opposite of what it would have done if banks had viewed the Bailout as a fix). And now that the Bailout has been voted down, the TED Spread is up only modestly from its levels an hour or so ago. In other words, the market yawned.
Of course, maybe we’re just going to have a delayed reaction. There are 85 minutes left in the trading day. Still time for an honest-to-God crash.
Update 3:45 PM: Good thing Clusterstock left that little caveat….the panic has increased…or perhaps more accurately, the recognition of how bad this credit crisis is is finally beginning to penetrate the denial.
Update 3:55 PM : Yen holding at earlier levels, some recovery in the delayed Dow I get (down 600 vs. 700 earlier), oil not falling further but gold continues to spike.