US stocks end lower after House OKs plan

All major indexes suffered big losses last week.

October 5, 2008 13:16
3 minute read.


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SHARES WALL STREET Stocks ended an intensely volatile week with another sell-off Friday while credit markets remained strained after enthusiasm over the US government's $700 billion financial rescue plan gave way to worries about obstacles still facing the American economy. The Dow Jones industrials fell 157 points, and all the major indexes finished the week with big losses. Investors dumped stocks late in the session after a big intraday rally, repeating a defensive move seen throughout the yearlong market pullback. As lawmakers voted on the plan, which President George W. Bush quickly signed into law, the Dow advanced more than 300 points. After it passed, the blue chips moved in and out of positive territory before ending down more than 150 points. Investors had been anxious for resolution on the government's plan to buy up bad assets from banks and other institutions to shore up the financial industry and help resuscitate credit markets. Trading across markets was turbulent throughout the week as investors tried to determine whether the plan would win approval and what effect it might have. On Monday, the House's rejection took Wall Street and Capitol Hill by surprise and handed stocks their biggest losses in years. The Senate subsequently passed a sweetened version of the plan that added tax breaks and raised the limit on federal deposit insurance from $100,000 to $250,000. The Dow fell 157.47, or 1.50 percent, to 10,325.38 after rising more than 310 points. Broader stock indicators also ended lower. The Standard & Poor's 500 index fell 15.05, or 1.35%, to 1,099.23, and the Nasdaq composite index fell 29.33, or 1.48%, to 1,947.39. The two-day pullback Thursday and Friday left stocks with huge losses for the week. The Dow lost 7.34%, the S&P 500 fell 10.8% and the Nasdaq declined 9.38%. The bill's approval came as investors digested word that Wells Fargo Co. agreed to buy Wachovia Corp. in a $15.1b. deal. That cheered Wall Street because, unlike several recent banking tie-ups, it wasn't put together at the behest of regulators or using government money. The agreement upends a plan announced Monday by Citigroup Inc. to acquire Wachovia's banking operations for $2.16b., a move orchestrated by the Federal Deposit Insurance Corp. However, Citigroup was demanding that Wachovia honor its agreement. The FDIC said it is standing behind the agreement it made with Citigroup. Wachovia shareholders will receive 0.1991 share of Wells Fargo for every share of Wachovia they hold, valuing Wachovia at about $7 a share. The deal represents a nearly 80% premium to the stock's close of $3.91 on Thursday. The stock finished last week at $10, before the deal with Citigroup was announced. Wachovia shares rose $2.30, or 58%, to $5.21, while Wells Fargo fell 60 cents, or 1.7%, to $34.56. Citigroup fell $4.15, or 18%, to $18.35, making it by far the steepest decliner among the 30 stocks that make up the Dow industrials. EUROPE Markets brushed aside earlier losses in Asia and weaker than expected US jobs data to post healthy gains Friday on expectations the US House of Representative would finally back the government's $700b. bank bailout. At the close, Britain's FTSE 100 index was up 109.91 points, or 2.2% at 4,980.25, while Germany's DAX was 136.40, or 2.4% higher at 5,797.03. The CAC 40 in France performed the best of all up 117.47 points, or 3.0%, at 4,080.75. ASIA Nearly all markets were in the red in the wake of Thursday's losses on Wall Street. Japan's benchmark Nikkei 225 stock average lost 1.9% of its value, closing at 10,938.14, its lowest since May 18, 2005. Hong Kong's Hang Seng index slid 2.9% to 17,682.40, while key indices in Australia, Singapore, India, Malaysia and Thailand also fell. Only Taiwan bucked the regional trend and edged higher. Markets in mainland China, South Korea and Indonesia were closed for national holidays. CURRENCY The 15-nation euro bought $1.3835 in late New York trading, edging up from $1.3824. Earlier in the day, the euro hit a 13-month bottom of $1.3701. This week, the dollar is still up 5.3% against the euro. The pound also rose to $1.7781 from $1.7655 late Thursday. The dollar edged higher to 105.35 Japanese yen from 105.27 yen. In other New York trading, the dollar was unchanged from Thursday at 1.0796 Canadian dollars and slipped to 1.1264 Swiss francs from 1.1364. COMMODITIES Gold for December delivery fell $11.10 to settle at $833.20 an ounce on the New York Mercantile Exchange, after earlier dropping as low as $822.50. Light, sweet crude for November delivery fell 9 cents to settle at $93.88 a barrel on the Nymex.

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