Dow Drops 348 Points

News at a Glance

• Stocks Plummet: Traders turn bearish after bill, weak data.



• Bill Passes: Senate approves revised bailout, 74-25.



• On to the House: Bill aims for bicameral approval Friday.



• Longer Bread Line: Jobless claims rise, exceeding consensus.

The Lowdown

The Senate passed a modified version of the $700 billion bailout package designed to rescue the financial industry on Wednesday night, but after some disappointing economic data, traders were far from convinced that the bill would be enough to keep a recession at bay.

The Senate approved the 451-page bill by a vote of 74 to 25. The dissent came largely from Republican lawmakers, who opposed the bill's ancillary tax breaks, additions that inflated its actual cost to $810 billion.

Still, the sentiment on Capitol Hill was overwhelmingly positive as lawmakers congratulated one another on a bipartisan achievement that came two days after the House defeated an earlier version of the bill and sent the markets reeling.

"It's a much improved bill, and Congress rose to the occassion," Sen. Chuck Schumer (D-N.Y.) said on Larry King Live after the vote. "The Senate did, and we hope the House will in a few days."

The new bill includes $110 billion in tax breaks, including scaling back the number of households required to pay the alternative minimum tax and incentives for using renewable sources of energy. The bill also temporarily raised the ceiling on the Federal Deposit Insurance Corp.'s guarantee on bank deposits from $100,000 to $250,000.

Traders were reluctant to embrace the bill before the House vote, tentatively scheduled for Friday. Disappointing reports on the manufacturing sector and the labor market helped send the major indexes tumbling. The Dow Jones Industrial Average lost 348 points to finish the day at 10483.

Each of the broader indexes fell more than 4%. The Nasdaq dropped 93 to 1977, and the S&P 500 fell 47 to 1114.

Factory orders declined in August by more than economists had expected. Separately, weekly jobless claims rose again last week, eclipsing economists' estimates. Heavy job losses tied to Hurricane Gustav remained a drain on the economy.

The Labor Department will release its monthly jobs report on Friday, though by then the market's focal point may be Congress.

The Senate bill appears to have some additional support in the House. Congressman David Dreier (R-Calif.), among the 133 Republicans who voted 'no' on the first bill, said he would change his vote because of the new bill's checks on executive pay and "growth-oriented tax cuts," the Associated Press reported.

President Bush implored the House to pass the bill. "With the improvements the Senate has made, I believe members of both parties in the House can support this legislation," he said in a statement. "The American people expect -- and our economy demands -- that the House pass this good bill this week and send it to my desk."

Three blocks from the White House, the Federal Reserve is considering another reduction to the federal funds rate to stimulate the economy and ease the financial crisis, The Wall Street Journal reported. A rate cut at the Fed's next meeting on Oct. 28-29 would signal at least a temporary pause in the Federal Open Market Committee's stand against inflation.

World markets had a mixed reaction to the bill. In Japan, the Nikkei lost 1.9% on concern that the bailout package did not go far enough to prevent a crisis in the global economy. Traders in Japan also turned bearish on the auto sector after weak monthly sales data. However, Hong Kong's Hang Seng finished up 1.1%. Most of the major European indexes lost ground.

The yield on the three-month Treasury fell to 0.60, as more traders sought refuge in bonds to protect their assets.

Commodities prices fell with the broader market. Crude oil prices continued to slip. By 4:04 p.m., crude traded down $5.38 on the day at $93.80 a barrel. Gold also took a big step back, falling $47.10 on the day to $840.20.

Corporate News

• UBS (UBS) expects to post "a small profit" when it releases third-quarter earnings on Nov. 4, the Swiss bank said in a statement. UBS also said it had trimmed its exposure to the subprime lending market. The firm predicted 2009 would be "an overall profitable year."



• Ford (F) chief executive Alan Mulally said he expected the recession to last longer and affect more people than prior estimates and that the entire auto industry would suffer as a result, The Wall Street Journal reported. A day after weak September sales sent Ford shares reeling, Mulally continued to dismiss the notion that the firm could file for bankruptcy, pointing out Ford's restructuring efforts and large capital base. Meanwhile, General Motors (GM) Chief Operating Officer Fritz Henderson echoed Mulally's concern, predicting a rough start to 2009. "Certainly in the first half it's going to be weak," he said, Reuters reported.



• Verizon (VZ) pinned some of the blame for the recent increase in customer data breaches on outsourcing. In a study conducted by Verizon Business, the firm found individual industries face specific problems when addressing data security because data access and potential discovery vary across the sectors. However, restaurant and retail firms are particularly susceptible to data theft because they often hire third parties to handle sensitive customer information, including credit card transactions.



• Playboy (PLA) has set its sights on the struggling financial sector. The adult entertainment magazine is seeking roughly 20 women who work (or worked) in the financial sector to pose for its upcoming feature, "Women of Wall Street," Reuters reported. Playboy has focused on failed industries before, tracking down former employees for its "Women of Enron" and "Women of WorldCom" photo shoots in the wake of the firms' collapses.

The Economy

• Initial jobless claims rose to 497,000 last week, up from a revised 496,000 in the prior week, the Labor Department said. Economists had predicted the number of people seeking unemployment benefits for the first time would come in at 475,000. REPORT



• Factory orders, a measure of demand, fell 4.0% in August, down from a revised 0.7% increase in July, the Commerce Department said. For August, economists had expected orders to have fallen 2.9%. REPORT

ReadMe

• Forbes on the bailout's added costs: Before it was passed by the Senate, the bill went from costing taxpayers $700 billion to costing them $810 billion. The culprit: tax breaks. STORY



• The Washington Post on the 'no' votes: Here's a quick look at the 25 senators who opposed the bill. STORY



• The New York Times on what the bill will cost banks: By raising the ceiling on the FDIC's deposit guarantee, the Senate effectively forced the agency to raise its premiums. STORY

WatchMe

• CNN on the bailout: Sens. Chuck Schumer (D-N.Y.) and Lindsey Graham (R-S.C.) tell Larry King why they were completely on board with the Senate plan. VIDEO



• CNBC on other ideas for the bailout: Jonathan Kappell, a professor at the Yale School of Management, and Larry Kudlow, a pundit who went to Princeton, yell at one another over alternatives as the Senate votes. VIDEO

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