Stocks plunged yesterday with the Dow Jones industrial average falling nearly 780 points - the biggest one-day point drop ever - after federal lawmakers failed to pass a $700 billion plan to bail out the financial system.
The vote by the House of Representatives rejecting the bill created a frenzied sell-off by jittery investors who worried this rescue package to help bolster the economy was slipping away. Fears of a continued credit crunch on Wall Street and more turmoil pushed investors to sell feverishly.
Financial markets began to erode before the vote, and by the end of the day, the Dow set a record for a one-day point drop, falling 777.68 to 10,365.45. It fell 684.81 on the first trading day after the Sept. 11, 2001, terrorist attacks. Investors sold rapidly yesterday in the final trading hours after lawmakers voted against the bailout package.
Other indicators also fell. The Nasdaq dropped 199.61, or 9.14 percent, to 1,983.73, the eighth largest point decline and the third biggest percentage fall in its history. The Standard & Poor's 500 index declined 106.59, or 8.79 percent, to 1,106.42. It was the S&P's largest-ever point drop and its biggest percentage loss since the week after the October 1987 crash.
The Dow's 7 percent decline was the 17th biggest percentage drop in its history, well below the more than 20 percent drops seen in October 1987 and the Great Depression.
"We're in for a rough few days," said Kevin McIntyre, an associate professor of economics and business at McDaniel College in Westminster. "Given how strongly the market is reacting, it's clear the market expected a deal to be struck today."
Rejection of the bill came just hours after yet another distressed bank, Wachovia Corp., said it was selling its banking operations to Citigroup Inc. with help from the federal government.
Wachovia was the latest financial institution to fall in the mortgage crisis. Merrill Lynch & Co. was sold to Bank of America, while Washington Mutual Inc., Lehman Brothers Holdings Inc. and Bear Stearns have also become victim to soured mortgage investments.
Maryland-based companies also suffered amid the broad market sell-off. Provident Bankshares Corp. stock lost 20.2 percent of its value, or $2.22, to close at $8.77. Baltimore asset managers Legg Mason Inc. and T. Rowe Price Group saw double-digit drops in their shares. Legg lost $7.75, or 17.26 percent, to close at $37.14. Price fell $10.93, or 17.94 percent, to $50.
