Men pass the New York Stock Exchange on the way to work in a rain storm Friday, Sept. 26, 2008 in New York. (AP Photo/Mark Lennihan)
NEW YORK (AP) -- Financial markets remained jittery Friday after efforts to approve a $700 billion banking bailout hit a serious roadblock. Stocks fell sharply, while fears of a deepening economic crisis fed safe-haven buying in Treasury notes.
Investors were unnerved as government efforts to avoid an economic meltdown fell into chaos. President Bush, in a statement shortly after the opening bell on Wall Street, urged lawmkers to come together to carve out a rescue package. On Thursday, Republican lawmakers rejected the emergency financial rescue package over the enormous price tag of the White House-backed proposal, hours after congressional leaders from both parties announced they were nearing agreement on a deal.
The rescue would remove billions of dollars of bad mortgages and other risky assets off the books of financial firms in a bid to free up lending and revive the economy. In a last-minute shakeup, some Republican lawmakers want an alternative plan under which the government would provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.
With the prospects of a deal uncertain, negotiations in Washington were continuing Friday as investors kept close watch on the proceedings.
The market was also tense after Washington Mutual Inc. became the largest U.S. bank to fail. The Federal Deposit Insurance Corp. seized WaMu on Thursday and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion. It was the largest bank by far to fail in U.S. history and the latest financial firm to collapse under the weight of enormous bad bets on the mortgage market.
Although WaMu's failure was expected, it nonetheless underscored for investors how widespread the problems are in the financial sector.
Credit markets remained strained. The yield on the 3-month Treasury bill, considered the safest short-term investment, was trading at 0.73 percent, up from 0.72 percent late Thursday. The lower the yield on a T-bill, the more desperation there is in the market; investors are willing to take a return of practically nothing in return for preserving their principal. The yield on the benchmark 10-year Treasury note fell to 3.81 percent from 3.84 percent late Thursday.
In the first hour of trading, the Dow Jones industrials fell 70.17, or 0.64 percent, to 10,951.89.
Broader stock indicators also fell. The Standard & Poor's 500 index declined 14.01, or 1.16 percent, to 1,195.17, and the Nasdaq composite index fell 30.20, or 1.38 percent, to 2,156.37.
Light, sweet crude for November delivery fell $2.31 to $105.71 on the New York Mercantile Exchange.
Uncertainty over the bailout package left the dollar mixed against other major currencies. Gold prices rose.
In another dose of unnerving news, the Commerce Department said the spring's economic rebound was less robust than previously estimated. Gross domestic product, or GDP, increased at a 2.8 percent annual rate in the April-June period. That fell short of the 3.3 percent growth estimated a month ago, but was still better than two previous dismal quarters.
Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 164.3 million shares.
The Russell 2000 index of smaller companies fell 12.82, or 1.82 percent, to 692.92.
Overseas, Japan's Nikkei stock average fell 0.94 percent. Britain's FTSE 100 fell 2.55 percent, Germany's DAX index fell 1.76 percent, and France's CAC-40 fell 1.82 percent.
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