Stocks Fall as Congress Drags Its Feet

Stocks declined Thursday as a fresh batch of dismal data agitated a market already on edge about a freeze in the credit markets and the bailout bill as it heads to the House.

"Congress is dragging its feet to get this passed," said Tom Schrader, managing director for U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore. "I think economic worries are starting to settle in. Wall Street is starting to worry that the more credit dries up the longer it's going to take to reverse the negative consequences of what we've already seen."

The Dow Jones Industrial Average was down more than 300 points, or 3 percent, in the first 15 minutes of trading. The S&P 500 and Nasdaq shed about 4 percent.

CNBC.com-parent General Electric was the biggest drag on the Dow after the conglomerate announced an offering of 547.83 million shares of GE stock priced at $22.25 a share. (Track the Dow winners  and losers.)

GE said Wednesday it planned to raise $12 billion through a common stock offering, and that it is selling $3 billion of preferred shares to Warren Buffett's Berkshire Hathaway.

Factory orders tumbled 4 percent in August, more severe than the 2.5 percent expected, and July was revised lower. Jobless claims rose by 1,000 to their highest level since September 2001, the Labor Department reported. That comes ahead of Friday's employment report, which is expected to show that U.S. employers cut 100,000 jobs from nonfarm payrolls last month.

Even before the economic reports, the market had been on edge after the Senate late Wednesday approved a sweetened version of the $700 billion bailout package for banks.

Of course when we say "sweetened," we mean loaded with sweet and sour PORK, which could derail the bill when it goes to the House for a vote on Friday.

>> Poll: What's the Worst Add-On in the Senate Bailout? Vote Now.

Still, there were some provisions for tax breaks for individuals and corporations in the bill that were well received.

Shares of solar energy companies rose as the bill includes an eight-year extension on tax credits for solar-energy projects. Shares of JA Solar and U.S. market leader SunPower advanced.

In Europe, the ECB left interest rates unchanged at 4.25 percent but ECB president Jean-Claude Trichet's speech will be closely watched to see how he plans to tackle Europe's banking crisis.

In the U.S., Federal Reserve officials are weighing further interest rate cuts, even if Congress approves the bailout, because of the worsening economic outlook, the Wall Street Journal reported on its Web site in an unsourced report.

The Securities and Exchange Commission said late Wednesday that it would extend the ban on short-selling in more than than 950 financial stocks in a bid to give lawmakers more time to pass the rescue package.

The government should take stakes in banks in order to recapitalize them rather than instituting the $700 billion bailout, Hugh Hendry, chief investment officer and Partner at Eclectica Fund, told CNBC on Thursday.

Banks were mixed: Regional banks such as National City and Sovereign Bancorp rose more than 10 percent, while big banks such as Bank of America and JPMorgan declined.

The SEC is investigating whether traders spread rumors to drive down shares of former investment banks Bear Stearns and Lehman Brothers , USA Today reported, citing an SEC subpoena.

Also in the financial sector, UBS said it expected to make a small profit in the third quarter of 2008, putting an end to a string of negative quarters and defying the market crisis.

American International Group shares gained as the troubled insurer prepares to kick off an asset sale.

Potash shares skidded more than 20 percent amid worries about the impact of falling commodity prices. The world's largest fertilizer company, which was red hot this summer, has fallen 55 percent since its June peak. Still, the stock is trading at three times its IPO price of $32 a share.

STILL TO COME:

FRIDAY: August jobs report; ISM services index; earnings from Family Dollar

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