2:15PM EST: (UPDATE IN EXTENDED ARTICLE) Fear swept across the financial markets Monday afternoon, sending the Dow Jones industrials down as much as 705 points, as traders feared the financial bailout package would not pass the House. As the vote was shown on TV, stocks plunged and and investors fled to the safety of the credit markets, worrying that the financial system would keep sinking under the weight of failed mortgage debt.

The markets were highly volatile, with the Dow regaining ground to trade with a loss of about 360, then falling backing again, trading down about 400 at the 10,730 level.

UPDATE 4:20PM EST: Wall Street has ended a stunning session with a huge loss, with the Dow Jones industrials plunging 778 points — their largest point drop ever — after the failure of the financial bailout plan in the House.

The Dow Jones Industrial Average slid 778 points for its biggest point drop ever as $1.1 trillion in market value was erased from American equities. The MSCI World Index of 23 developed markets slid 6.9 percent, the most in 22 years.

Wachovia Corp. tumbled after the bank was sold to Citigroup Inc. in a deal brokered by the Federal Deposit Insurance Corp., sending shares of Sovereign Bancorp Inc. down 72 percent and National City Corp. more than 63 percent. Financial shares in the S&P 500 retreated a record 16 percent. Goldman Sachs Group Inc. and Morgan Stanley, the two largest Wall Street securities firms, fell more than 12 percent.

The S&P 500 decreased 106.43 points, or 8.8 percent, to 1,106.58. The Dow slid 777.68 points, or 7 percent, to 10,365.45. The Nasdaq Composite Index declined 199.61, or 9.1 percent, to 1,983.73. Twenty-five stocks fell for each that rose on the New York Stock Exchange.

The S&P 500 sank to its lowest level since October 2004 as all 10 of its industry groups tumbled at least 3.9 percent. Only one stocks in the benchmark index for U.S. equities advanced. The Dow average’s retreat was its steepest since the first trading day after the September 2001 terrorist attacks, sending the 30-stock gauge to an almost three-year low.

More than $1 trillion was wiped off the value of U.S. equities today, according to data compiled by Bloomberg.com

(Yehuda Drudgestein – YWN)