Stocks tumbled again Tuesday, as traders fled stocks for a second day after the federal government’s $700 billion financial bailout plan appeared to get bogged down in a legislative morass.
Traders fretted that the plan could become too punitive and participation limited under proposals from congressional Democrats, while congressional Republicans have their own ideas about how a plan should be fashioned.
The result is a difficult balancing act for Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke — under what they perceive is a need to act quickly. With financial markets teetering on the brink and credit markets seized up, they warned today that the crisis has reached the point where its effect on the real economy could be severe if a bailout plan isn’t passed. And no one knows better than Bernanke, a long-time student of the causes of the Great Depression, that that’s where Wall Street meets Main Street.
About the only good news is that the declines of the last two days have occurred on half the volume of the NYSE’s record 10.6 billion share day set last week, and some tech stocks, like Microsoft (NASDAQ: MSFT), which announced a $40 billion share buyback plan Monday, have been dodging the downdraft.
Intel (NASDAQ: INTC), Yahoo (NASDAQ: YHOO), Sun (NASDAQ: JAVA), Applied Materials (NASDAQ: AMAT) and Symantec (NASDAQ: SYMC) were other names that escaped the selling.
But Google (NASDAQ: GOOG) lost a fraction despite unveiling its first smart phone. Apple (NASDAQ: AAPL) and Palm (NASDAQ: PALM) lost 3.2% and 4.9%, respectively, while Research in Motion (NASDAQ: RIMM) closed down 0.9%.
In late trading, the beleaguered financial sector got a much-needed boost from news that famed value investor Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) was investing in Goldman Sachs (NYSE: GS).
The Nasdaq fell 25 to 2153, the S&P lost 18 to 1188, and the Dow tumbled 161 to 10,854. Volume declined to 5.26 billion shares on the NYSE, and rose to 2.02 billion on the Nasdaq. Decliners led by a 24-9 margin on the NYSE, and 19-9 on the Nasdaq. Downside volume was 70% on the NYSE, and 72% on the Nasdaq. New highs-new lows were 10-157 on the NYSE, and 25-142 on the Nasdaq.
Note: The Market Close will return on Thursday, Sept. 25.
