U.S. stocks finished lower Wednesday, though well above session lows as investors nervously awaited the Senate vote Wednesday night on the U.S. financial rescue plan. Trading was choppy, with stock prices fluctuating sharply intraday while the credit markets remained extremely tight.
But traders and lawmakers weren't the only ones having a busy Wednesday. Billionaire investor Warren Buffett seized the spotlight with a $3 billion investment in conglomerate General Electric (GE), which has been sandbagged by problems at its financial-services unit.
Bonds and gold were higher amid an investor flight to safety. The dollar index was also higher. Crude oil futures fell.
On Wednesday, the blue-chip Dow Jones industrial average finished lower by 19.59 points, or 0.18%, at 10,831.07. The broader S&P 500 index fell 3.68 points, or 0.32%, to 1,161.06. The tech-heavy Nasdaq composite index shed 22.48 points, or 1.07%, to 2,069.40.
On the New York Stock Exchange, 16 stocks fell in price for every 15 that advanced. The ratio on the Nasdaq was 19-10 negative.
Bank of America (BAC), Merrill Lynch (MER) and other selected financials posted gains despite weakness in the broader market. Airline stocks were also outperforming the broader market, aided by lower energy prices.
There are some early arguments the economy is headed into a severe recession regardless of whether Congress passes a financial rescue plan. The Senate is set to vote Wednesday night on the revised Treasury plan the House defeated Monday.
Buffett will take a stake in GE, which will be offering $12 billion in common stock to the public and selling $3 billion to the billionaire's Berkshire Hathaway (BRKA) in a private perpetual preferred placement. Buffett will get a 10% dividend and 10% of his investment is callable in three years at a 10% premium. He will also get warrants to the tune of $3 billion in common stocks at a $22.25 strike price. GE shares sank after a price and outlook downgrade from Deutsche Bank analysts Wednesday morning.
In a subsequent CNBC interview, Buffett said that if the Treasury gave him a 1% participation rate in the financial bailout on their funding terms and time horizon, he would take it.
There is increased optimism that the plan will be passed later this week, according to comments from various Congressmen. Senate minority leader McConnell earlier predicted victory of the plan in the Senate tonight.
The U.S. FDIC would be allowed unlimited borrowing power temporarily from the Treasury under the Senate bailout plan being considered, according to a Wall Street Journal bulletin, as part of a "larger government deposit coverage that would extend until the end of next year."