US bailout rejected, Dow plummets 777 pts

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The failure of the bailout package in Congress literally dropped jaws on Wall Street and triggered a historic selloff - including a terrifying decline of nearly 500 points in mere minutes as the vote took place, the closest thing to panic the stock market has seen in years.

The Dow Jones industrial average lost 777 points Monday, its biggest single-day fall ever, easily beating the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.

As uncertainty gripped investors, the credit markets, which provide the day-to-day lending that powers business in the United States, froze up even further.

At the New York Stock Exchange, traders watched with faces tense and mouths agape as TV screens showed the House vote rejecting the Bush administration's $700 billion plan to buy up bad debt and shore up the financial industry.

Activity on the trading floor became frenetic as the "sell" orders blew in. The selling was so intense that just 162 stocks on the Big Board rose, while 3,073 dropped.

The Dow Jones Wilshire 5000 Composite Index recorded a paper loss of $1 trillion across the market for the day, a first.

The Dow industrials, which were down 210 points at 1:30 p.m. EDT, nose-dived as traders on Wall Street and investors across the country saw "no" votes piling up on live TV feeds of the House vote.

By 1:42 p.m., the decline was 292 points. Then the bottom fell out. Within five minutes, the index was down about 700 points as it became clear the bill was doomed.

"How could this have happened? Is there such a disconnect on Capitol Hill? This becomes a problem because Wall Street is very uncomfortable with uncertainty," said Gordon Charlop, managing director with Rosenblatt Securities.

"The bailout not going through sends a signal that Congress isn't willing to do their part," he added.

While investors didn't believe that the plan was a cure-all and it could take months for its effects to be felt, most market watchers believed it was at least a start toward setting the economy right and unlocking credit.

"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson, president of Johnson Research Group. "This isn't a market for the timid."