NEW YORK (CNNMoney.com) --
Bond prices slipped, raising the corresponding yields, as the panicked flight-to-quality buying of last week subsided a bit. The dollar tumbled versus other major currencies. Gold prices skyrocketed.
The Dow Jones industrial average (INDU) fell 373 points, or 3.3%, according to early tallies. The Standard & Poor's 500 (SPX) index fell 3.9% and the Nasdaq composite (COMP) fell 4.2%.
Stocks rallied Friday, with the Dow rising 371 points, as the government's announcement that it would help rescue banks from toxic mortgage debt soothed investors at the end of a gut-churning week on Wall Street.
But stocks erased the whole advance Monday, as investors worried about the details of the Treasury's proposed $700 billion bailout plan.
"I think the headline risk is the government continuing to have to hammer out the details of the plan," said Bill Stone, chief investment strategist at PNC Financial Services Group.
"The market reacted favorably to the broad plan last week and you saw a huge snap when the world didn't end," he said. "But right now markets are a little uneasy as they wait for more information."
Also in focus: Morgan Stanley and Goldman Sachs - the last two stand-alone investment banks - which federal regulators have converted into bank holding companies. Separately, Japanese financial services company Mitsubishi UFJ said it was buying a stake in Morgan Stanley.
Investors welcomed stock buyback plans for Hewlett-Packard, Nike and Microsoft, although that news failed to have an impact beyond the individual stocks.
Oil and gold prices surged as investors again sought safety in the comparably less risky assets. The dollar was weaker versus the yen and euro.
$700 billion bailout: The Bush administration asked Congress on Saturday for approval to spend as much as $700 billion to buy bad mortgage debt and help mitigate the financial crisis. (Full story).
The most sweeping economic intervention by the government since the Great Depression is still taking shape. Here's what's known so far.
On Monday, lawmakers debated whether to add provisions to the plan that would protect taxpayers, among other issues.Sizing up the economic threat.
Financial crisis: The bailout was announced at the end of an extraordinary week on Wall Street that began with Lehman Brothers (LEH, Fortune 500) filing the biggest bankruptcy in history.
Also last week: Merrill Lynch (MER, Fortune 500) was bought by Bank of America (BAC, Fortune 500) in a $50 billion stock deal; AIG (AIG, Fortune 500) narrowly avoided bankruptcy after the Fed bailed it out with an $85 billion bridge loan; and speculation swirled about the fates of Morgan Stanley (MS, Fortune 500), Goldman Sachs (GS, Fortune 500) and Washington Mutual (WM, Fortune 500).
On Sunday, it was announced that federal regulators were converting Morgan and Goldman into bank holding companies. The move will allow them to buy smaller regional banks and to have more direct access to Fed funding. It also means that the banks are now under the Fed's supervision. (Full story)
Separately, Japanese financial services firm Mitsubishi UFJ said it will buy between 10% and 20% of Morgan Stanley in a deal that could be worth up to $6 billion. (Full story)
Morgan shares gained 3% and Goldman shares fell 4%.
Washington Mutual (WM, Fortune 500) shares continued to plummet, losing another 21%.
Other bank stock losers included Wells Fargo (WFC, Fortune 500), down 12.5%, Wachovia (WB, Fortune 500), down 12%, JP Morgan (JPM, Fortune 500), down 10% and Bank of America (BAC, Fortune 500), down 6%.
The Philly KBW Bank (BKX) index fell 8.8%.
Stone said investors were partly just backing out of bank stocks after the sector jumped hugely at the end of last week. But in addition, the selloff in the sector was directly reflecting the jitters about the details of the $700 billion bailout plan.
"What companies are more in the cross hairs of how this Treasury plan works out?" said Stone. "If the entire market is volatile, you are going to see it manifested in the financial shares."
Oil and gold: Oil prices surged, with U.S. light crude oil for October delivery briefly spiking more than $25 a barrel to hit $130 before pulling back to settle at $120.92, a gain of $16.37 - the biggest one-day dollar gain ever. Trading was briefly halted after it first spiked $10 a barrel.
Oil prices had been plummeting since peaking at $147.27 a barrel on July 11, as investors bet that sluggish global growth will diminish oil demand. But over the last few sessions, prices have been bouncing back.
Prices spiked Monday on a mix of jitters about the $700 billion bailout plan, a weak dollar and some end-of-contact maneuvering as traders closed out the October contract.
COMEX gold for December delivery rose $44.30 to settle at $909 per ounce.
Stock buyback plans: Microsoft, Nike and Hewlett-Packard all announced that they are planning to buy back billions in stock, a move typically seen as reflecting corporate confidence. (Full story)
Microsoft said its board had approved the repurchase of $40 billion worth of shares after having just finished a previous $40 billion buyback program. Microsoft also said it is boosting its quarterly dividend to 13 cents per share from 11 cents per share. Microsoft (MSFT, Fortune 500) shares gained 3%.
Nike (NKE, Fortune 500) said it will buy an additional $5 billion of its own stock over 4 years, following the end of its current four-year $3 billion buyback program that was approved in June 2006. Shares were little changed.
Hewlett-Packard (HPQ, Fortune 500) said it was buying an additional $8 billion in stock on top of the $1.6 billion in shares it bought in its fiscal third quarter. HP shares inched lower.
Among other movers, airline, railroad and trucker stocks all slumped on the spike in oil prices, as higher fuel prices have a direct impact on the cost of doing business. The Dow Jones Transportation (DJTA) average gave up 5%.
Homebuilders plummeted, including Pulte Homes (PHM, Fortune 500), Lennar (LEN, Fortune 500) and D.R. Horton (DHI, Fortune 500). The Philadelphia Housing (HGX) sector index slipped 6%.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by over three to one on volume of 870 million shares. On the Nasdaq, decliners beat advancers three to one on volume of 1.43 billion shares.
Other markets: Treasury prices slumped, raising the yield on the benchmark 10-year note to 3.87% from 3.73% late Friday. Treasury prices and yields move in opposite directions.
Last week, Treasury prices rallied and yields tumbled as nervous stock market investors looked for safer areas to park their cash. The three-month Treasury bill fell to a 68-year low near 0%, demonstrating the utter lack of interest in risk-taking amid the financial market crisis.
But yields moved higher across the spectrum Monday.
In currency trading, the dollar fell against the euro and yen.
Gas prices fell for the fifth day in a row, after tumbling for eight days in a row in the aftermath of Hurricanes Gustav and Ike. (Full story).
In global trade, Asian markets ended higher and European markets ended lower.
First Published: September 22, 2008: 10:35 AM EDT