World and Nation

Worries About Bailout Plans Give Stocks a Downward Shove

Fresh concerns about the biggest government bailout in history sent stock markets down sharply on Monday, while a weakening dollar sparked a frantic rush into commodities as investors remained nervous about the financial health of Wall Street.

The Dow Jones industrials closed down 372 points, or 3.3 percent, at 11,015.69 after spending the day deep in negative territory. The broader Standard & Poor’s 500-stock index finished down 3.8 percent. Commodities and precious metals, including gold, silver and copper, all posted strong gains as investors sought to hedge against the declining dollar.

Capping a volatile day, oil prices jumped 16 percent — their largest one-day gain — to finish at $120.92 a barrel. Some analysts said the surge was largely a fluke caused by thin trading on the day a key futures contract expired. The more liquid November contract also rose, but it posted a more modest gain of 6 percent, closing at $108.97 a barrel.

“It’s crazy,” said Bart Melek, a commodities analyst at BMO Capital Markets. “It certainly reinforces the Chinese saying ‘May you live in interesting times.’ It’s certainly turning out to be a curse.”

A sense of unease settled over the market as investors fretted about the size and details of the government’s $700 billion bailout plan and concerns it could drive up inflation and further depress the value of the dollar. The dollar fell to $1.4804 against the euro in late New York trading, compared to $1.4470 late on Friday.

Investors seeking safety showed a preference for commodities like gold, moving away from Treasury bills. The moves implied that investors considered traditional hedges like precious metals to be more reliable than bonds issued by the government, which could face a spiraling debt from the bailout plan.

“The unknowns still seem to be ruling,” said Ryan Detrick, a strategist at Schaeffer’s Investment Research. And Tom Bentz, an energy analyst at BNP Paribas, said, “What can I say? Every market is just out of control right now.”

Monday’s concerns were centered on Washington, where President Bush urged Congress to pass the bailout package by the end of the week. The proposed legislation would provide sweeping powers to the Treasury Department to buy bad assets from financial firms.

But Democrats have started questioning the plan, particularly the broad authority it seeks to confer on the Treasury. Some lawmakers said they wanted to include limits on executive compensation at financial firms and support for middle-class homeowners as part of the legislation.

The administration and some Republican lawmakers warned about the consequences of a protracted political battle that could delay the plan. Questions also remain about who will place a value on the bad assets and whether taxpayers will ultimately be able to profit from the enterprise.