Stocks Fall Ahead of House Bailout Vote On Slowdown Fears

October 2, 2008 5:17 PM EDT

Stocks were weak again today heading into tomorrow's vote from the U.S. House on the $700 billion financial bailout bill. While many expect the bill to be passed this time, there is still much uncertainty. Much of today's weakness was attributed to more signs that the ongoing credit crunch is hitting Main Street, as unemployment claims rose, factory orders fell and a key trucking company warned of a slower-than-expected holiday season.

The Dow fell 348 points, Nasdaq lost 93 points and the S&P 500 sank 47.

The Labor Department said Initial Jobless Claims rose 1,000 to 497,000, a seven year high and sharply above the 475,000 economists were expecting. In addition, August factory orders dropped 4%, the most in nearly two years.

A profit warning from a key trucking company, Con-way Inc. (NYSE: CNW), ignited more fears of a large economic slowdown. Con-way said volumes are weak and that the traditional peak seasonal uptick in demand has been muted.

Once-high flying fertilizer company Mosaic (NYSE: MOS) was absolutely dismantled today after a disappointing earnings results. Mosaic also lowered its FY09 phosphate sales volume, but left its Potash sales guidance unchanged. Shares of Mosaic closed down 41% today. Other ag names followed: Potash (NYSE: POT) was down about 27%, Agrium (NYSE: AGU) was down 24%, Monsanto (NYSE: MON) was down 16%, CF Industries (NYSE: CF) was down 34%, and Interpid Potash (NYSE: IPI) was down 21%.

Showing the continued fears in the money market, three-month Libor, the rate banks charge each other for loans, rose for a fourth straight day. The rate climbed 6 bps today to 4.21%, indicating the continued tight conditions in the credit market. The Libor-OIS spread, the difference between the three-month dollar rate and the overnight indexed swap rate, widened to a record 260 bps. The spread is a gauge of cash scarcity among banks. On a positive note, Libor for overnight dollars fell 111 bps to 2.68%.

In other news, GE (NYSE: GE) priced a 547,825,000 share common stock offering at $22.25 after yesterday's $3 billion preferred stock deal with Warren Buffett. Also, the SEC extended the financial short selling ban until October 17th.

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• Warren Buffett
• Initial Jobless Claims
• Factory Orders
• Standard & Poor's

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