Stocks pare losses after sharp early drop
The market battles back after President Bush vows a financial-system rescue deal is coming. Credit markets remain jittery.
NEW YORK -- The stock market battled back from a sharp early decline this morning following the stalled negotiations on a financial-system rescue plan, but the jittery credit markets remained on edge.
The Dow Jones industrial average recovered from a drop of more than 150 points in the first few minutes of trading. As of 8:15 a.m. PDT, the Dow was down 62.60 points, or 0.6%, to 10,959.46. The Standard & Poor's 500 index fell 1.4%. The Nasdaq composite index was off 1.7%.
Stocks recovered some of their early losses after President Bush promised in a brief televised address that a rescue plan would ultimately be struck
"There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done," Bush said. "We are going to get a package passed."
However, the credit markets remained under pressure as investors huddled in the safety of Treasury securities and banks continued to conserve their cash.
The yield on the three-month Treasury bill rose slightly to 0.91%, but remained far below its 2.5% average over the last two months. The yield on the two-year note slid to 2.01%, from 2.17% on Thursday.
Rates that banks charge each other for short-term loans remained high. The TED spread -- a measure of how much banks are paying for loans in relation to risk-free Treasuries -- remained at more than twice its two-month average.
The government's seizure Thursday night of Washington Mutual Inc. sparked a sell-off in Wachovia Corp. and National City Corp., other troubled lenders that investors fear could be at risk of failure.
Wachovia slumped $2.66, or 19.4%, to $11.04. National City skidded $1.07, or 21.4%, to $3.92.
Washington Mutual skidded more than 90% to 16 cents. JP Morgan Chase & Co., which agreed to buy the bulk of WaMu's assets, rose 1.9%.
