Another wild ride ends below 10,000

NEW YORK — After a breathtaking plunge that took the Dow Jones industrial average down 800 points — its biggest drop ever during a trading day — ending with a loss of 370 didn't seem so bad.

Wall Street managed a big afternoon rally Monday in yet another day of extreme volatility and worldwide worries about the financial crisis and stubborn credit, even after the $700 billion U.S. bailout.

Still, the Dow finished below 10,000 for the first time since 2004 and lost more than 3 ½ percent for the day, and there were no signs fear and unpredictability were leaving the stock market any time soon.

At its worst point, the Dow was down 800.06, an intraday record. The market rallied during the final 90 minutes of the trading day, and the Dow finished down about 370 points at 9,955.50.

The Dow is down almost 30 percent from its all-time high of 14,164.53, set a year ago Thursday. For the day, it lost 3.6 percent.

Microsoft, one of the 30 Dow stocks, fell $1.41 to close at $24.91 a share. Boeing, also a Dow stock, tumbled $2.54 to $51.29.

The Standard & Poor's 500 index shed 42.34, or 3.9 percent, to 1,056.89; and the Nasdaq composite index fell 84.43, or 4.3 percent, to 1,862.96.

Helping stocks rebound was speculation among traders that Wall Street's pullback had been severe enough to force the Federal Reserve into taking other steps to soothe the markets.

"If you can't say that we're oversold now I don't know what you say. You're at least due for a bounce if nothing else," said Bill Stone, chief investment strategist for PNC Wealth Management.

The day's decline came despite the $700 billion U.S. government bailout package, which was signed into law Friday after two weeks in which traders had appeared to count on the rescue as their only hope to avoid a market meltdown.

But investors overseas weren't necessarily convinced. In Japan, the Nikkei average lost more than 4 percent.

And then the losses spread across Europe — nearly 6 percent for the FTSE-100 in Britain, 7 percent for the German DAX and more than 9 percent for France's CAC-40.

In the United States, President Bush twice made unscheduled remarks, saying in Cincinnati the economy would be "just fine" but that the bailout package needed time to work.

Bush's comments came as his administration announced that it had tapped a 35-year-old former Goldman Sachs executive, Neel Kashkari, to head the government's rescue effort on an interim basis.

Kashkari, an Indian American born in Ohio, has a master's degree in engineering and a master's degree in business administration.

He joined Goldman Sachs in San Francisco, heading up its information-technology security investment-banking practice.

At Treasury, Kashkari has been given a string of key tasks, including helping draft the legislation Congress passed last week creating the $700 billion rescue effort.

Scott Talbott, a lobbyist for the Financial Services Roundtable, a group of 100 large companies, said Kashkari will have his work cut out for him.

"He's got the health of the housing market and the economy on his shoulders," he said. "But he's got a $700 billion checkbook, too."

Kashkari will keep his title as assistant Treasury secretary for international affairs but will head the new Office of Financial Stability on an interim basis.

The designation of Kashkari as interim head was necessary because the permanent head, a presidential appointee, must be confirmed by the Senate, now in recess ahead of the November elections.

The troubles that started with an overheated housing market in the U.S. have infected financial markets around the world, making banks fearful of lending to other banks, let alone to businesses and consumers. That has led to worries that economies might not only sputter but slide into reverse.

The crush of selling Monday came exactly one week after the Dow lost 778 points, its biggest closing loss in terms of points. On that day, the House voted down an earlier bailout package that had appeared to be a safe bet to pass.

The swings in the Dow on Monday also marked the beginning of a fourth week of tumult in the markets. Triple-digit Dow swings have been commonplace since mid-September, when investment house Lehman Brothers went bankrupt and the government stepped in to bail out insurer American International Group.

But even with the bailout package in place — a plan under which the government will buy bad mortgage-related assets off the books of banks — investors remain worried banks are too fearful to lend and are cutting off air to the economy.

Over the weekend, governments across Europe rushed to prop up failing banks, while the governments of Germany, Ireland and Greece also said they would guarantee bank deposits.

U.S. investors appeared worried the bailout would not be enough to jump-start the economy. Even other steps, including a Federal Reserve decision to expand a loan program to squeezed banks, didn't help much.

The sharp one-day tumbles over the last two Mondays don't come close to the drops that became black marks on the timeline of Wall Street history.

Black Monday, in October 1987, and stock drops that preceded the Great Depression were more than 20 percent. Monday's drop, by comparisons, was less than 8 percent at its worst.

The market "is displaying one of its worst traits with a herd mentality, and investors have an appetite for feeding on fear," said Anthony Sabino, a professor of law and business at St. John's University.

But he cautioned it was still not a nightmare scenario.

"Most certainly, this is not the Great Depression of the 1930s, but [is like] the savings and loan crisis of the 1980s — and we bailed them out," he said. "Once people catch their breath, they'll see this is the proper analogy and this will breathe life back into banking institutions."