Dow Turns Positive; Techs Tumble

The Dow turned positive Friday as investors were encouraged by words from President Bush and a steady stream of legislators that a bailout deal will get done.

The Dow Jones Industrial Average tumbled about 130 points at the opening bell then clawed it all back, led by JPMorgan and Bank of America as traders passed swift judgment on financials. (Track the Dow winners and losers.)

The S&P 500 and tech-heavy Nasdaq declined as Research In Motion's outlook rattled tech investors.

Bailout talks ended without a deal Thursday night but lawmakers remained under pressure to get a deal done. Congressional leaders will go back to the table today to try and hammer out the deal.

"The legislative process is sometimes not very pretty," Bush said. "But we will rise to the occasion. We are going to get a package passed."

"We're going to get this done — and stay in session long enough to get it done," Senate Majority Leader Harry Reid said.

"The time is now for House Republicans to come to the negotiating table and for presidential politics to leave the negotiating table," Reid said. "The insertion of presidential politics has not been helpful ... It's been harmful," referring to criticism of GOP presidential candidate John McCain that he rushed in to the negotiations only to slow down the process.

The McCain camp announced Friday that he will attend the debate tonight against Democratic nominee Barack Obama.

"I actually think [Congress is] working quite quickly," said Jim Rosenthal, managing director of institutional trading at Ladenburg Thalmann. "The legislative branch of this country does not work in 48 hours ... We're just not used to watching the process," he said. "Legislation usually takes six months and a lot of bickering and fighting."

Still, he remained confident: "Congress will get a deal passed," Rosenthal said.

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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.

The credit crunch claimed its biggest victim late Thursday: Washington Mutual . The U.S. shut down the nation's largest savings and loan late Thursday, wiping out its stock. JPMorgan Chase jumped in to snap up the assets and deposits of WaMu for $1.9 billion.

That left investors wondering who might be next.

"You're talking about the largest failure in banking history, so there is going to be a negative reaction, right?," William Smith, president of Smith Asset Management, told Reuters. "What you're going to see is the strong stronger, and the weak are going to die off."

(How do you invest in a crazy market like this? Click on the video at left.)

And that was reflected in the financial sector, with traders giving a vote of confidence to the likes of Bank of America and JPMorgan but punishing others it thought might be in jeopardy. Wachovia and Ohio-based National City were among the sector's biggest decliners.

While all eyes were on Capitol Hill and the financial sector, techs quietly burned.

Research In Motion tumbled 25 percent in what one analyst described as a "slaughtering" of the stock. The company turned in strong second-quarter results but what traders homed in on was the outlook. The BlackBerry maker is spending a ton of money on new products and marketing when the global economy is heading into a storm.

"We believe the company is making a bet on market share at the expense of gross margin. We understand the bet and think it is a smart move," TD Newcrest analyst Chris Umiastowski wrote in a note to clients. "But overall, the Street tends to be short-sighted, and this explains the slaughtering of the stock."

The stock's plunge may have seemed scary, particularly as we watch banks go down like pins at a bowling alley. But some analysts saw it as a positive.

"[W]e believe this pullback is an excellent entry point into a tremendous growth stock, with the multiple at a multiyear low,"JPMorgan analyst Paul Coster said in a note.

Investors punished other handset makers including Apple and Nokia , as well ashandset-chip makers Marvell Technology and Broadcom .

KBHome reported its loss quadrupled in the third quarter from a year ago as revenue plunged 56 percent.

In 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.

Meanwhile, consumer sentiment hit a seven-month highin September but increasing worries about the crisis in the financial system clouded the outlook.


MONDAY: Personal income, spending; Fed's Hoenig speaks; earnings from Circuit City, Walgreens
TUESDAY: Case-Shiller home-price index; Chicago PMI; consumer confidence; Fed's Lockhart speaks
WEDNESDAY: Auto sales; weekly mortgage applications; ADP employment report; ISM manufacturing index; construction spending; weekly crude inventories
THURSDAY: ECB annoucnement; jobless claims; factory orders; natural-gas inventories; Fed's Bullard speaks; earnings from Constellation Brands
FRIDAY: August jobs report; ISM services index; earnings from Family Dollar

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