Stocks Plunge Again After Dismal Economic Figures Released

Wall Street stocks suffered a fresh plunge yesterday as investors reacted to dismal US economic figures and watched anxiously for signs of weakening in Congressional opposition to the Bush administration's $700bn bail-out package.

By lunchtime in New York, the Dow Jones Industrial Average had fallen by 298 points to 10,532, pushed lower by a sharp drop in factory orders and by a rise in the number of Americans claiming unemployment benefit.

All eyes were on Capitol Hill where party leaders were hoping a range of tax breaks, amendments and concessions would persuade the House of Representatives to pass the US government's economic rescue plan at the second attempt today.

Leaders of both parties expressed cautious optimism about overturning Monday's 228-to-205 defeat of the plan. Ahead of a meeting with Congressional leaders, President Bush urged a "yes" vote to salve the nation's economic wounds.

"This issue has gone way beyond New York and Wall Street," said Bush. "This is an issue affecting hard-working people who are worried about their savings, worried about their jobs, worried about their houses, worried about their small businesses."

Critics have accused party leaders of a thinly disguised effort to buy votes. The rescue plan, which has grown from three pages to 451 pages, now contains a variety of hand-outs including tax relief for manufacturers of children's wooden arrows, for rum producers in the US Virgin Islands and for operators of car-racing tracks.

These measures have irritated some of the Democrats who voted for the policy in the first place. But a handful of Republican rebels who defied the president on the initial ballot said they would back the amended plan. They included David Dreier, a Californian representative, who praised the addition of "growth-oriented tax cuts".

Among a glut of disappointing numbers yesterday were data showing a 4% drop in US factory orders during August. The fall was the biggest for two years and it reflected a particularly sharp slump in demand for cars and aircraft, which have been hit by the high price of fuel.

The US labor department's weekly count of benefit claimants provided further bad news, showing a rise of 1,000 job seekers to 497,000, the most since the aftermath of the terrorist attacks of September 11 2001.

On the corporate front, there are few bright spots. The hotels group Marriott warned that its trading, particularly in timeshares, was being hit by "tight credit, soft consumer spending and a difficult securitisation market".

Marriott's chief financial officer, Arne Sorenson, joined calls for Congress to approve the contentious bail-out package: "There are thousands, maybe tens of thousands, of jobs at stake in our company alone, and we are typical."

At a glance

Wool importers, Alaskan fishermen and Hollywood film studios are among those who stand to gain from tax breaks in the US bail-out package. Among the more obscure measures is a provision lifting a 39-cent excise tax on wooden arrows fired in children's toy bows. Two Oregon senators inserted the clause, saying the tax was an anomaly and the proposal would save archery firms $200,000 annually.