U.S. stocks declined in morning trading as investors economic fears outweighed any cheer from the Senate passage late Wednesday of the governments $700 billion economic bailout package.
In morning activity, the Dow Jones industrial average was off more than 200 points, or about 2%, at 10,614.11 while the broad market S&P 500 index fell 26.76 points, or 2.5%, to 1,134.4. The Nasdaq composite was also lower, dropping 50.19 points, or 2.4%, to 2,019.21.
Although the Senates action renewed hope that the rescue package would be passed into law, economic worries kept share prices under heavy pressure, as the Labor Department reported that initial claims for jobless benefits increased by 1,000 to a seasonally adjusted 497,000, well above economists estimates and the highest in seven years.
The Senate bill a revised version of the one the House rejected Monday by a 228-205 vote sweetened the original package by tacking on a number of tax breaks and other perks in the hopes of swaying the House to reverse its original veto. The House is expected to vote Friday on the new version.
The add-ons include tax breaks for businesses, users of alternative energy and hurricane victims as well as relief from the alternative minimum tax. Also, it would boost the+ limit on Federal Deposit Insurance Corp.-insured bank deposits to $250,000 from $100,000 for one year. Additionally, a bill boosting improved health insurance for mental health was wrapped into the package.
In a related move, the Securities and Exchange Commission extended its ban on short selling in financial companies to allow time for completion of work on the anticipated passage of legislation, according to a news release from the regulator. The short-selling ban will expire no later than Oct. 17.
At the same time, the SEC extended its order requiring institutional money managers to report new short sales of certain stocks to Oct. 17 but could extend it indefinitely after a period of public comment.
These efforts relating to short sales have focused particularly on the securities of financial institutions whose health may have an impact on financial stability, SEC officials said in a news release. The steps the commission has taken are designed to ensure the continued smooth operation of orderly markets. Our actions have been taken in consultation with regulators of the major developed securities markets around the world, with whom we have coordinated in monitoring market reactions.