Stocks Bomb After Senate Vote

On Wednesday night, the United States Senate overwhelmingly passed (74-25) the massive $700+ billion bailout plan, similar to the one that was rejected by the House of Representatives on Monday.

The final bill before the Senate looked quite different from the House version. In addition to being 475 pages in length, the bill added a number of provisions for tax relief, various tax credits and outright pork barrel designed to induce specific House members to sign on to the measure.

Apparently, Wall Street was not impressed or was more concerned over an increase in initial unemployment claims (497K) and an enormous decrease in factory orders (-4.0%) for August. By contrast, July factory orders showed an increase of 0.7%.

Major US indices began the session lower and continued to decline throughout the day.

Dow 10,482.85 -348.22; NASDAQ 1,976.72 -92.68; S&P 500 1,114.28 -46.78; NYSE Composite 7,155.71 -364.24

With all the sweeteners in the bill, passage in the tumultuous House seems more certain, though rumblings remain among free market Republicans and now, so-called "Blue Dog" Democrats who may not readily sign on to legislation which increases spending without aligned taxes for which to pay the additional freight.

Meanwhile, European markets also were reeling from their own uncertainties in the banking sector The London interbank offered rate, or Libor, rose again, and the US commercial paper market plunged to a 3-year low.

Also on the minds of investors were yesterday's horrific auto sales reports for September which showed major auto makers suffering one the their worst months on record, an overall decline of 27% from a year ago. In addition to most new American cars and trucks being gas hogs and overpriced, a pullback in lending has left many would-be car buyers seeking alternatives.

On the day, declining issues once again outstripped advancers by a wide margin: 5313-1097. New lows continued to crush against new highs, 1031-17.

Volume was moderate, continuing to indicate what everybody already knows: there are hordes of cash sitting on the sidelines, waiting until either the congress passes (or doesn't pass) a bailout bill and/or the volatility is wrung out of the market and at least an interim bottom is put in place. At this point, nobody is holding his or her breath as the "crisis" drags onward.

NYSE Volume 1,463,072,000
NASDAQ Volume 2,212,399,000

Commodities continued a fascinating trade regimen. Oil dropped $4.56, to $96.97. Gold also fell by a whopping $43.00, to $844.30. Silver shed another $1.65 - a nearly 13% drop - to $11.12. The fall in the price of silver is historic, the largest one-day percentage decline ever.

While debate continues behind the scenes in the House, debate on Main Street and on the radio waves maintained a negative bent with most Americans deploring the current condition, expressing widespread distaste for the prospect of a $700+ billion bill which is still being seen as a bailout for rich Wall Street bankers and associated fat cats.

One really cannot argue with the US public on that note.