New York: Wall Street went into a new tailspin on Thursday with investors nervous about the global banking crisis as a crucial vote neared in the US House of Representatives on a massive financial rescue package.
Weak US economic data also undermined sentiment on Wall Street, which saw a second day of dizzying losses in the past four sessions.
The Dow Jones Industrial Average sank 348.22 points (3.22%) to a three-year low of 10,482.85.
The action extended the volatility of the past few sessions after the blue-chip index saw a record plunge of 777 points Monday and a partial bounceback of 485 points on Tuesday.
The tech-heavy Nasdaq plunged 92.68 points (4.48%) to 1,976.72, its lowest level since 2005. The Standard & Poor’s 500 broad-market index slid 46.78 points (4.03%) to 1,114.28, its weakest close since 2004.
The market remained skittish about the widening global banking crisis even after the Senate approved a $700 billion financial rescue package with some additional tax breaks and additions and sent it back to the House of Representatives, which rejected a similar measure on Monday.
Aaron Smith at Economy.com said the apparent movement on the legislation failed to help credit markets, with banks still refusing to lend cash to other banks except at unusually high rates.
“Financial stress is threatening corporate funding channels and damaging the economic outlook,” Smith said.
Patrick O’Hare at Briefing.com cited “some uncertainty as to whether the recent add-ons will do more harm than good and stand in the way of a yes vote in the House.”
O’Hare said the decision by the European Central Bank to hold interest rates steady also sent a chill into markets worried about a deepening credit crisis.
On the economic front, news of a jump in weekly jobless claims to 497,000 highlighted ongoing US economic worries.
A separate report showed a 4.0% drop in August factory orders. John Ryding at RDQ Economics said this suggests the economy “probably contracted significantly in the third quarter and the recession appears to be deepening.”
Among key stocks, General Electric slid 9.67% to $22.13 after pricing its new share offering at $22.25, well below the closing price on Wednesday.
Heavy equipment maker Caterpillar, an economically sensitive stock, slid 8.3% to $52.22.
Merck dipped 2.99% to $31.13 after dropping plans to seek approval to market its Taranabant drug for obesity due to adverse effects in clinical trials.
Bonds rallied on a renewed flight to safety. The yield on the 10-year US Treasury bond slumped to 3.646% against 3.768% on Wednesday and that on the 30-year bond declined to 4.154% against 4.248%. Bond yields and prices move in opposite directions.