Mammoths for a New Ice Age

While the Dow heavyweights limited the blue chips' loss to 3%, The Nasdaq and the small-cap Russell 2000 broke through Monday's floor to new three year lows, with the credit markets that drive economic growth obviously dysfunctional. Of course, not every big company proved immune. General Electric incurred a 9% discount in line with what the market sought on its $12 billion share offering, meant to relieve reliance on commercial paper that's no longer bought reliably enough.

Hartford Financial shed 32%, and might want to send a bill to Harry Reid, the Senate majority leader from Nevada. In the course of justifying action on the bailout, Reid told reporters last night that a colleague said a big insurer is near bankruptcy. With HIG shares already breaking down following a credit downgrade threat a couple of days ago, Reid's remarks ignited a forest fire. MetLife shares dropped 15% and Prudential 11%. Reid quickly backtracked, while analysts swore up and down that there will be heavy writeoffs all around but no Chapter 11 filing. But with markets unmoored, the line to get out of such heavily invested participants as insurers was a very long one today.

Hedge funds continued to sell commodity shares, and may or may not have been joined by some of the longer-term investors anticipating a potential rise in capital-gains taxes. (And they'd need to be very long-term indeed to have capital gains to worry about at this point.) And while they were pulling out of EBay and American Express, John McCain was effectively conceding Michigan to Obama, who has risen in the polls almost as quickly as the Nasdaq has plummeted. The latter is now down 30% since peaking 11 months ago.

Now the stage is set for tomorrow morning's jobs report and the afternoon bailout vote in the House. The best thing that could happen as far as the payroll number is concerned is that it might not yet reflect the credit-driven layoffs of the past week and the emerging nationwide freeze on hiring. And as for the bailout, now eliciting new howls of outrage because it was garnished with some pork, just wait. If you don't like this one, another will be along soon enough.