US stocks decline as bailout is stalemated

New York: Financial markets remained tense yesterday after efforts to approve a $700 billion federal banking bailout ran into opposition from Republican lawmakers.

Stocks declined broadly while demand for safe-haven buying in government debt remained but eased slightly.

In midday trading, the Dow Jones industrials fell 79.80, or 0.72 per cent, to 10,942.26.

Broader stock indicators also fell. The Standard & Poor's 500 index declined 18.46, or 1.53 per cent, to 1,190.72, and the technology-heavy Nasdaq composite index fell 39.18, or 1.79 per cent, to 2,147.39.

Investors turned cautious as the Bush administration's efforts to come up with a rescue package faced setbacks. On Thursday, Republican lawmakers rejected the emergency rescue package over concerns about the price tag of the White House-backed proposal, hours after congressional leaders from both parties announced they were nearing agreement on a deal.

Shortly after yesterday's opening bell on Wall Street, President George W. Bush said at the White House lawmakers can express doubts but ultimately should "rise to the occasion" and approve a plan to stave off what he sees as an economic calamity. Congressional leaders spoke out in favour of the plan.

The rescue is designed to remove billions of dollars of bad mortgages and other now-toxic assets from the books of financial firms in a bid to free up lending. Tight lending conditions make it harder and more expensive for businesses and consumers to borrow money, a headwind for the economy. In a last-minute shake up, some Republican lawmakers want an alternative plan under which the government would provide insurance to companies that agree to hold frozen assets, rather than have the US purchase the assets.

With the prospects of a deal uncertain, negotiations in Washington were continuing yesterday as investors kept close watch on the proceedings.