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 lost 348.22, or 3.2 percent, to close at 10482.85. The S&P 500 shed 4 percent and the tech-heavy Nasdaq fell 4.5 percent.
CNBC.com-parent General Electric was the biggest drag on the Dow, falling nearly 10 percent, after the conglomerate announced an offering of 547.83 million shares of GE stock priced at $22.25 a share. 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.
Rounding out the top three decliners on the Dow were American Express and Alcoa . (Track the Dow winners and losers.)
Technology shares took a hit, with Apple off more than 8 percent, and Research In Motion and Intel off more than 7 percent.
Tony Dwyer, an equity-market strategist at FTN Midwest Securities, said today's selloff was all about the credit market.
The credit market has "spun out of control ... and nothing that's been done to this minute — including the Senate passing the bill — has done anything to help in any way," Dwyer said.
The commercial-paper market (i.e., short-term loans) fell for a third straight week as worries about banks put a lid on business lending.
In the latest sign of the slowdown in business and consumer spending, Marriott reported its earnings dropped 28 percent and slashed its outlook for the fourth quarter and 2009.
Today's economic data didn't help: Factory orders tumbled 4 percent in August, more severe than the 2.5 percent expected, and July was revised lower. Jobless claims rose by 1,000to 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.
In Europe, the ECB left interest rates unchangedat 4.25 percent. 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.
"Here's what it's going to take: A massive global coordinated rate cut. And ... buying a trillion dollars — no strings attached — of credit in the U.S.," Dwyer said. "A trillion because it's got to be a big enough number to shock people," Dwyer said.
"You've got to change the perception from fear of being invested to fear of not being invested," Dwyer explained.
The Securities and Exchange Commission said late Wednesday that it would extend the ban on short-selling in a bid to give lawmakers more time to pass the rescue package.
Banks were mixed: Regional banks such as National City and Sovereign Bancorp rose more than 8 percent, while some big banks, such as Bank of America and Citigroup declined.
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.
AIG shares gained as the troubled insurer prepares to kick off an asset sale.
Potash shares tumbled 27 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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