Dow Jumps 485 Points

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On Monday, the fervently wished-for bailout was rejected Monday by the House of Representatives in a stunning turn of events, and investors reacted with a vengeance. Major U.S. stock indexes plummeted Monday in one of their worst sessions ever. The Dow suffered its worst one-day point loss ever, falling 777 points, or nearly 7%. The S&P 500 plunged 8.79%, and the Nasdaq tumbled a jaw-dropping 9.14%. According to Bloomberg News, $1.2 trillion was knocked off the value of American equity securities.

Just how bad was it on Monday? Miller Tabak strategist Phil Roth provides some clues: Some 96% of the operating company stocks on the New York Stock Exchange fell in price, and 97% of the day's trading volume was in the declining stocks. The S&P 500 fell 2.4% in the final five minutes of trading. The VIX index, widely regarded as the market's primary "fear gauge", leaped as high as 48.40 on Monday, the highest level since readings of 48.46 on July 24, 2002 and 49.35 on Sept. 21, 2001.

S&P chief technical strategist Mark Arbeter provides some other telling statistics: The S&P 500's drop of 8.49% was the largest one-day decline in the large-cap benchmark since the crash on Oct. 19, 1987 when the market fell 20.5%. Funds came rushing out of stocks and corporate bonds and into treasuries on a massive flight to safety. At one point during the Monday's session, the yield on the three-month Treasury bill fell near 0%.

"Traders can get a rally going, but a new bull market will probably have to await a sizable drop in long term interest rates to attract serious investment buying," wrote Roth in a note early Tuesday.

Meanwhile, the credit markets endured another nerve-wracking day. Reuters reports the cost of borrowing overnight dollars on global money markets soared despite central banks pumping billions into the banking system to prevent it seizing up further after U.S. lawmakers' rejection of a $700 billion financial rescue bill panicked markets. The London interbank offered rate (Libor) for overnight dollars jumped by a record 430 basis points to 6.87 percent, the highest in at least 7-1/2 years. The scramble for cash as banks sought to square their books over the end of the quarter saw the European Central Bank lend $30 billion dollars overnight at a huge rate of 11% -- more than five times the Federal Reserve's 2% target rate -- and call for bids for an additional $50 billion. The Irish government's decision to guarantee all bank deposits added to speculation central banks could cut interest rates in concert soon.

In economic news Tuesday, the U.S. Case/Shiller home price index fell 0.9% in July to 166.23 for the 20-City composite index. Thirteen of the 20 cities posted month-over-month declines, while eleven posted month-over-month declines in June. Year-over-year price declines accelerated in July, with the July index is down 16.3%, after a 15.9% decline in May. All 20 cities still saw year-over-year declines, with eleven cities seeing double digit year-over-year price declines. The biggest declines continue to be reported in Phoenix, Miami and Las Vegas, down 29.3%, 28.2% and 29.9%, respectively, from the prior-year period. Los Angeles, San Diego and San Francisco were also weak, down 26.2%, 25.0%, and 24.8%, respectively.

U.S. consumer confidence improved to 59.8 in September, after rising over 6 points to 58.5 in August (revised from 56.9). The present situations index fell to 58.8 versus 65.0 (revised from 63.2). The expectations index rose to 60.5 after jumping over 11 points to 54.1 (revised from 52.8). The 1-year ahead inflation index continues to decline, with the September index falling to 6.2%, from 6.6% previously, and is down from 7.7% in May and June.

U.S. Chicago PMI slipped to 56.7 in September, after jumping to 57.9 in August. That's stronger than expected. The employment index rebounded to 49.1 after dropping to 39.2 in August. New orders were 53.9 from 60.2. The prices paid index was little changed at 80.7 versus 80.6.