Stocks Fall as Bailout Passes

News at a Glance

• Bill Passed: House, Bush sign off on bailout package.
• Equities Drop: Traders flee on economic concerns.
• Jobs Report Disappoints: Economy lost 159k jobs in Sept.
• Bigger Wagon: Wells Fargo to buy Wachovia for $15.4 bln.

The Lowdown

Congress and the Bush administration approved a revised bill intended to rescue the struggling financial sector Friday, but traders hardly appeared satisfied.

Stocks took another fall after the House approved the measure by a vote of 263 to 171 and it was signed into law by the president. The Dow Jones Industrial Average reversed an early 200-point gain to finish the day down 157 points at 10325. The Nasdaq dropped 29 to 1947, and the S&P 500 lost 15 at 1099.

It was a counterintuitive turn for the market, whose fortunes seemed tied the passage of the rescue bill earlier this week. However, a slew of weak economic data left traders wondering whether the bill would be strong enough to avert a recession.

The bill was designed to bail out ailing financial companies and offer help to struggling mortgage holders. The legislation allows the Treasury to buy up Wall Street's toxic mortgage-backed assets, taking their weight of firms' balance sheets, thereby loosening the credit markets. The bill, which now includes added tax cuts and a temporarily higher ceiling on Federal Deposit Insurance Corp. guarantees, was approved by the Senate on Wednesday night.

The President signed the bill shortly after it cleared Congress. Before the bill arrived on his desk, he praised the bipartisan effort in Washington but warned that the economy still faces "serious challenges." He added, "Americans should also expect that it will take some time for this legislation to have its full impact on our economy."

The bill's passage in the House was immediately hailed by Federal Reserve Chairman Ben Bernanke. "The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses," he said in a statement.

The House had rejected an earlier version of the bill on Monday, sending the Dow to its largest single-day drop in the history of the index. Since then, stocks had remained highly volatile, as traders struggled to handicap the odds of the bill's passage and its ability to prevent further damage to the economy.

Before the House vote, another pillar of the financial sector fell. Wachovia (WAC) agreed to be acquired by Wells Fargo (WFC) in a deal worth $15.4 billion, the firms said. Not to put too fine a point on it, but the phrase "without government assistance" appeared in bold letters at the top of the companies' release.

Wachovia had been in advanced talks with Citigroup (C) over a government-backed deal, but that sale would have left out the firm's brokerage and asset management divisions, The Wall Street Journal reported.

Elsewhere on Wall Street, AIG said it planned to sell off several of its non-core assets after its $85 billion federal rescue.

Before the market opened, traders received another weak prognosis for the economy that ultimately set the tone for the close. The Labor Department said U.S. payrolls shed 159,000 jobs last month, the largest single-month decline in five years and well below economists' estimates.

The commodities market remained relatively calm. By 4:14 p.m., crude oil traded down 65 cents on the day at $93.13 a barrel. Gold traded up $6.70 at $839.90.

World markets were mixed. In Asia, Japan's Nikkei dropped 1.9% and Hong Kong's Hang Seng slipped 2.9% after Thursday's steep selloff in the U.S. In Europe, London and Paris each finished up more than 2%.

Corporate News

• AIG (AIG) plans to sell off several of its businesses and assets as part of a broader effort to streamline operations, the firm said. The firm's U.S. property and casualty and foreign general insurance divisions, as well as its foreign life insurance unit, are explicitly not on the block. AIG received an $85 billion bailout from the government and is now looking to slim down to stay afloat.
• UBS (UBS) will cut 2,000 jobs from its workforce, lifting its total job-loss count to 17,000 for the year, the firm said. Most of the cuts will come "businesses being exited or downsized in order to protect and sustain [the bank's] core client franchises."
• JPMorganChase (JPM) will let go of six high-ranking Washington Mutual executives, including chief executive Alan Fishman, after acquiring the bank, the Associated Press reported, citing a company memo. The rest of WaMu staff of 43,000 will be told about the fate their jobs on Dec. 1, the AP said, citing a separate memo.

The Economy

• The economy lost 159,000 nonfarm jobs in September, compared to a revised loss of 73,000 jobs in August, the Labor Department said. The September unemployment rate held steady at 6.1%. Hourly earnings rose by 3 cents, or 0.2%, slowing from a revised August increase of 8 cents, or 0.4%. The average workweek dipped to 33.6 hours, down slightly from 33.7 hours in the prior month. Economists had expected a 105,000-job drop in payrolls, an unemployment rate of 6.1%, an hourly wage boost of 0.3% and an average workweek of 33.7 hours. REPORT
• The Institute for Supply Management's Non-Manufacturing Index slipped to 50.2, down from an August reading of 50.6. Economists had predicted a September reading of 50.0. REPORT

ReadMe

• The New York Times on the vice presidential debate: Sen. Joe Biden and Gov. Sarah Palin threw down last night over the economy, Iraq and energy policy. STORY
• The Wall Street Journal on the credit crisis: Even as Congress moves on legislation, banks are remaining tight with their loans. STORY
• The Guardian on globalization: A columnist makes the case for a global regulatory body in the midst of the crisis. STORY

WatchMe

• CNBC on the vice presidential debate: A brief clip on the candidates' stances on tax policy. VIDEO
• Bloomberg on the Federal Reserve: James Bullard, president of the Federal Reserve Bank of St. Louis, says the Fed should refocus on inflation as the crisis eases. VIDEO
• Wall Street Crisis: Is Your Money Safe? A look at the prospects for investors in the volatile market. CNBC, 7 p.m.