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Stocks Open Lower as Bailout Talks Stall

Investors hit the brakes Friday, halting the rally that started Thursday, as political wrangling cast a pall of doubt that the government's bailout plan for the financial system might not get done.

"This is probably the most chaotic situation I have ever seen … you've got law makers playing Russian Roulette with the entire economy," Jack Bouroudjian, chairman of Capital Market Technologies, told "Worldwide Exchange."

Bailout talks ended without a deal Thursday night as a rival Republican plan emerged, but congressional leaders will go back to the table Friday to try and hammer out the deal.

That sucked all the air out of the rally started Thursday, leaving stocks wallowing in the red Friday.

"Wall Street is being held captive by all the talks in Washington," Paul Nolte, director of investments at Hinsdale Associates, told CNBC.

If the proposed figure of $700 billion was made available it would exceed the total lending by the International Monetary Fund since its inception, according to Reuters, but some analysts say that it still wouldn't be sufficient to unclog the financial arteries.

Investors also reeled from news that the credit crunch had claimed its biggest victim: Washington Mutual . The U.S. shut down the nation's largest savings and loan late Thursday. JPMorgan Chase jumped in to snap up the assets and deposits of WaMu for $1.9 billion.

Investors will also be closely watching other bank stocks: Wachovia and Citigroup.

In the morning's economic news, the final reading on second-quarter GDP showed the economy grew at a 2.8 percent pace, lower than the prior estimate of 3.3 percent but higher than the 0.9 percent rate in the first quarter. Corporate profits were also revised lower, showing a 0.4 percent decline, compared with the prior estimate of 1-percent growth, though that was better than the 7.7-percent drop recorded in the first quarter.

Since it's the final reading, on the second quarter, which was forever ago, it wasn't expected to have much impact on the market. However, growth has been slowing in the current third quarter, which ends at the end of September. We'll get the first reading on the third quarter in a month.

Still to come: A final reading on September consumer confidence at 10 a.m. ET. Economists expect to see an uptick in the gauge to 71 from 63.

Meanwhile, St. Louis Federal Reserve President James Bullard will take to the stage at 10 am in Murfreesboro, Tennessee as part of an economic outlook conference and Chicago Fed President Charles Evans will speak at the international banking conference at 10.40 am.

STILL TO COME:

FRIDAY: Bush speaks at 9:35am ET; St. Louis Fed pres. speaks; consumer sentiment

Send comments to cindy.perman@nbcuni.com.