Stocks declined Wednesday as disappointing economic data added to the weight on investors shoulders over the strained credit market and haggling on Capitol Hill.
The Dow Jones Industrial Average was off about 100 in the first half hour of trading, then added another 100 points to that after a reading on manufacturing, but pared that to a decline of 20 points by afternoon trading. (Track the Dow winners and losers.)
The Institute for Supply Management reported its gauge of manufacturing activity contracted for a second monthto its lowest level since October 2001. Measures of employment and exports fell sharply. A separate report showed construction spending was unchanged in August.
The ISM data "indicate the U.S. economy is contracting," Tony Crescenzi of Miller Tabak wrote in a note to clients, and "increase the odds of more Fed rate cuts, including the possibility of an intermeeting cut."
Meanwhile, private U.S. employers clipped 8,000 jobs from their payrollsin September, a surprisingly low figure, ADP reported. And mortgage applications dropped to their lowest in a month, the Mortgage Bankers Association said, amid anxiety about the health of the economy.
Crude oil fell below $97 a barrel after a report showed crude inventories rose by 4.3 million barrels, more than expected.
The Dow, Nasdaq and S&P 500 jumped higher Tuesday, but only managed to regain around half of their severe losses from Monday, when the bailout package was snarled in political wrangling and doubts over its effectiveness surfaced.
The Senate is expected to vote on a new version of the $700 billion bailout billtonight. The unusual time was set in deference to Rosh Hashanah, the Jewish new-year holiday, which ends at sundown today.
Meanwhile, House Republicans are working on an alternative bailout package.
Meanwhile the strain in the money markets worsened with overnight dollar rates rising as high as 6 percent, Reuters reported citing traders in Asia, making it even tougher for banks to secure day-to-day funding.
And hedge-fund managers will get their report cards later as a wave of investors are expected to demand their investments back after disappointing returns from the sector. The funds are holding record levels of cash to meet a flood of redemptions as the end of the month and quarter results are released.
Big banks declined, with Goldman Sachs and Morgan Stanley lower. American depositary shares of UBS fell after the bank said it said it was cutting 1,900 jobs.
Shares of regional banks were mixed: National City and Sovereign Bancorp advanced, while State Street declined. Genworth Financial and Sallie Mae also declined.