The NY Times reports that government leadership plans a second attempt to pass the $700 billion financial bill, which conflicts with a CNBC report that there is no possibility of a second vote.
The Volatility Index (VIX) spiked as much as 11.02 to 46.28, which is its highest level since 2002. The high levels of the VIX indicates greater uncertainty during the next 30 days.
The Nasdaq establishes a fresh session low and then pares some losses. The S&P 500 and Dow trade modestly above their worst levels. The financial sector is down 9.3%, energy is down 9.4% and tech is down 6.8%. The consumer staples sector is down 2.4%, making it the best-performing sector this session.
The S&P 500's decline of 6.1% is the largest one-day percent decline since falling 6.8% in April 2000. Only two stocks within the S&P 500 are posting a gain.
Commodities (-4.8%) fall on the rejected plan, with oil prices dropping 9.3% to $96.92 per barrel.
Meanwhile, Treasuries extend their gains as investors seek safety. The 10-year note is up nearly two points, sending its yield down to 3.61%.

The current Emergency Economic Stabilization Act vote tally comes at 207 for the plan, 226 against, with one vote remaining. A total of 218 votes were needed to pass the vote. House members can still change their vote, and as a result the number of yes votes did tick a few points higher.
Democrats voted 141 for, 94 against. Republicans voted 66 for, 132 against.
All three of the major indices hit multi-year lows. At session lows, the Dow, Nasdaq and S&P 500 were down 6.3%, 6.7% and 7.2%, respectively. The major indices currently post massive losses, although they have recovered quite a bit from the knee jerk reaction decline.

The pound fell the most against the dollar in 12 years and the euro weakened after European governments bailed out banks and a report showed confidence in the region's economic outlook dropped.
The currencies also declined versus the yen after Belgium, the Netherlands and Luxembourg extended an 11.2 billion euro ($16.1 billion) lifeline to Fortis, the largest Belgian financial-services firm, and the U.K. Treasury seized Bradford & Bingley Plc, the nation's biggest lender to landlords. ``It appears that both U.K. and European authorities still remain reactive rather than proactive in their response to dealing with the financial crisis,'' wrote Lee Hardman, a London-based currency strategist at Bank of Tokyo-Mitsubishi, in a report.
The dollar rose the most against the euro in seven weeks after President George W. Bush and congressional leaders agreed on a $700 billion plan to revive credit markets.
``Folks are realizing that financial turmoil is not necessarily restricted to the U.S.,'' said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets under administration. ``You've seen a spilling over into the euro zone and U.K. over the weekend, with the focus on Fortis and Bradford & Bingley. It's quite likely the dollar's going to continue to benefit.''
The Federal Reserve increased its existing currency swaps with foreign central banks to $620 billion from $290 billion to make more dollars available worldwide. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.
Stress at European institutions had produced a shortage of the currency, adding to its strength overnight, said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York.
``The fact they have expanded the dollar liquidity takes the demand for the dollars out of the market and internalizes that between the central banks via the swap line,'' Sinche said. ``That will reduce the dollar demand in the market temporarily. So it's not surprising that the dollar softened somewhat since the announcement of the swap agreement.''
``We are now in a environment where the dollar should be well-supported,'' said Daragh Maher, deputy head of currency strategy in London at Calyon, the investment-banking arm of France's Credit Agricole SA. ``Last week, we had sufficient wobbles about whether the plan would be passed. As it looks to be introduced, it should play as a dollar-positive.''

Dow down 465, Nasdaq down 120.

Annalisa Piazza of Newedge says PCE data show "consumption will provide little of very limited positive contribution to Q3 GDP growth. Below-trend growth is widely expected in the second half of the year and - given the bleak picture depicted by today's data - we cannot rule out negative readings." Newedge now sees more than 50% probability of Fed ease.

The major indices remain under heavy selling pressure. Within the S&P 500, 95% of stocks are posting a loss.
Energy stocks (-5.8%) are posting the sharpest decline as crude oil futures fall 6.1%. The financial sector is down 4.8% and the tech sector is down 4.7%.
The defensive oriented healthcare (-1.5%) and consumer staples (-1.5%) sectors are outperforming on a relative basis.
Investors are looking to avoid risky holdings, which is driving up the price of Treasuries. The benchmark 10-year note is up more than a point and a half, and the 30-year bond is up more than three points.

Lifted to $1.4475/80 area in thin gappy trade as the dollar lost ground most other places. Lift carried the pair through offers at $1.4435/40 and $1.4470/80 area although some residual supply may remain at the high.

The major indices hit fresh session lows during the previous 30 minutes of trade and are currently trading slightly above those lows. The Nasdaq is getting hit especially hard, down roughly 4%.
Shares of Nasdaq component Apple (AAPL 106.81, -21.42) drop 17%. A Morgan Stanley analyst cut her earnings estimate on Apple by 35% to $115 per share, which is 10% below the company's previous closing price, according to Bloomberg.com. The analyst also downgraded the stock to Equalweight from Overweight, citing slowing iPhone and Mac orders. Apple was also downgraded to Sector Perform from Outperform at RBC, noting that Apple is not recession proof.
The tech sector is down 4.5% this session.
The credit markets remain very tight, with dollar Libor -- which measures what banks charge each other to lend dollars over terms ranging from overnight to one year -- remaining at extremely elevated levels across all terms.
The TED Spread -- the difference between 3-month Libor and what the U.S. government pays for 3-month loans (3-month T-bill) -- is up 56 basis points to 3.48%. This is the highest level since at least 1984 and indicates banks are very reluctant to lend to each other. For comparison, the TED Spread averaged 0.4% from the beginning of 1998 to the end of 2006.
The bailouts of several European financial firms shows that overseas markets are experiencing similar turmoil as the U.S. financial markets. As a result, the dollar is gaining some ground, up 1.0% against a basket of world currencies.
The strength in the dollar and concerns related to economic growth are sparking a steep 6.2% decline in oil prices to $100.51 per barrel. Commodities as a whole are down 3.3%, although gold is posting a 1.2% gain to $894.20 per ounce in a safe-haven bid.

- No immediate change in size of BOE's current dollar operations
- Term of swap arrangement has been extended until end April 2009

"Real consumer spending was flat in August, partly because the tax stimulus checks have been spent." They est Q3 real consumer spending could decline for the first time in 17 yrs.

Futures continue to suggest a sharply lower open:(S&P futures vs fair value: -19.20. Nasdaq futures vs fair value: -28.00.). Citigroup (C) is acquiring Wachovia's (WB) banking operation in a deal facilitated by the FDIC. The FDIC entered a loss sharing arrangement, where Citi will absorb up to $42 billion of losses on a $312 billion pool of loans, with the FDIC absorbing losses beyond the $42 billion. Wachovia will continue to own AG Edwards and Evergreen. WB is down 89% in premarket trading. In economic news, personal income rose 0.5% (consensus +0.2%) in August and spending was flat (consensus +0.2%). PCE, an inflation measure, was unchanged month-over-month. Excluding energy and food prices, PCE rose 0.2% (consensus +0.2%).
The House of Representatives is meeting to vote on the bailout Monday morning. The Senate is expected to vote on the plan on Wednesday.
The core of the bill is based on Treasury Secretary Henry Paulson's request to purchase troubled, and mortgage-related, assets from banks so they can resume lending, in order to free up the frozen credit market.
Meanwhile, international markets were in turmoil after three major banking bailouts were announced in Europe.
The Dutch-Belgian bank and insurance giant Fortis failed and was provided with a $16.4 billion lifeline by the governments of Belgium, the Netherlands and Luxembourg. The British government nationalized the battered $91 billion mortgage lender Bradford & Bingley. Germany's regulators and banks bailed out Hypo Real Estate Holding AG, in a deal worth billions of dollars.
In the last session, on Friday, the Dow jumped more than 1%, but the Nasdaq slipped.

"if real spending is unch again in Sep, the third quarter as a whole will be down at an horrific 2.3% annualized rate. This is worse than we had been expecting so we now look for zero GDP growth at best in Q3."

In addition, dollar strength is also weighing on commodity markets, where corn, soybeans, rice and wheat are all lower. WTI Nymex crude oil fell to $100.80 low earlier, before bouncing back to $102.00, trading down 4.89 on session.

PCE flat, core PCE prices +0.2% for +2.6% YOY (highest gain since 1995).

The British pound fell the most against the dollar in 15 years and the euro weakened after European governments bailed out banks and investors lost confidence in the region's financial institutions.
The currencies also declined versus the Japanese yen after Belgium, the Netherlands and Luxembourg threw an 11.2 billion- euro ($16.3 billion) lifeline to Fortis, the largest Belgian financial-services firm, and the U.K. Treasury seized Bradford & Bingley Plc, the nation's biggest lender to landlords. The dollar rose the most in eight weeks against the euro after President George W. Bush and Congressional leaders agreed on a $700 billion plan to revive credit markets.
``It is not just American bad news out there,'' said Paul Robinson, a currency strategist in London at Barclays Capital and a former Bank of England economist. ``The dollar is appreciating against sterling and the euro as the U.K. and the euro zone are showing weakness.''
``The bailout will clearly undermine investor confidence in the euro and euro-zone assets,'' Lee Hardman, a London-based currency strategist for Bank of Tokyo-Mitsubishi, wrote in a report. ``It appears that both U.K. and European authorities still remain reactive rather than proactive in their response to dealing with the financial crisis.''
``The growing negative events in the euro-zone are shifting the balance very swiftly to the dollar on the front foot,'' said Simon Derrick, the chief currency strategist at Bank of New York Mellon Corp. in London. ``There are massive questions about how they are going to fund these nationalizations.''
European confidence in the economic outlook fell to the lowest since the slump in the wake of the Sept. 11 terrorist attacks. An index of executive and consumer sentiment dropped to 87.7 in September from 88.5 in August, the European Commission in Brussels said today. That is the lowest since the index fell to 86.6 in November 2001. Economists had forecast the indicator would drop to 87.3 this month, according to the median estimate of 33 economists surveyed by Bloomberg News.
Traders raised bets the ECB will lower borrowing costs to revive the 15-nation economy. The implied yield on the Euribor futures contract expiring in March fell 14 basis points to 4.51 percent today from 4.665 percent on Sept. 26. Policy makers will still keep the benchmark rate at 4.25 percent when they meet on Oct. 2, according to a Bloomberg News survey of 58 economists.
U.S. lawmakers reached agreement yesterday on the bank- bailout plan as House Republican leaders backed away from opposition to the proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week.
``We are now in a environment where the dollar should be well-supported,'' said Daragh Maher, deputy head of currency strategy in London at Calyon, the investment-banking arm of France's Credit Agricole SA. ``Last week, we had sufficient wobbles about whether the plan would be passed. As it looks to be introduced, it should play as a dollar positive.''

EUR/USD has reached a sessional minimum in area of a mark $1,4310 then it was slightly corrected in area $1,4350. Bids $1.4300, stops below, bids $1.4260/50, $1.4230/20, offers $1.4370
GBP/USD it is consolidated in the field of $1,8025 after has reached a mark $1,7956. Bbids $1.7960/50, $1.7915/00. Offers $1.8030, $1.8040/50
USD/JPY it is consolidated in the field of a sessional minimum on Y106,10. Bids Y106.00, Y105.65/60, Y105.10/00, offers Y106.50/55

US data starts at 1230GMT with the August personal income report.

EUR/USD $1.4400, $1.4350, $1.4450, $1.4000, $1.4680
USD/JPY Y106.50, Y107.00, Y107.35
GBP/USD $1.8300
EUR/CHF Chf1.5700
AYD/USD $0.8250
USD/CAD C$1.0325

Resistance 3: Y109.00
Resistance 2: Y108.00
Resistance 1: Y107.00
Current price: Y106.17
Support 1: Y106.00
Support 2: Y105.00
Support 3: Y103.70
Comments: Tech on yen hasn't changed. Resistance is around session high on Y107.00, then – at Friday’s high on Y108.00. Support is around Y106.00 (session low) and then on Friday’s low on Y105.00/10. Stronger support at Y103.70 (trend line from Mar 17).

Resistance 3: Chf1.1280
Resistance 2: Chf1.1120
Resistance 1: Chf1.1085
Current price: Chf1.1071
Support 1: Chf1.0980
Support 2: Chf1.0900
Support 3: Chf1.0825
Comments: USD/CHF has established session high on Chf1,1085 (the nearest resistance), overcoming of the given level will open road to Chf1,1120. Stronger level is Chf1,1280 (Sep 19 high). Level Chf1.0980 (50 % Fibo of decrease Chf1.1280-Chf1.0680) at present acts as the support, following support is presented by area of a session low on Chf1.0900/10, stronger level on Chf1.0825 (Friday's low).

Resistance 3: $1.8460
Resistance 2: $1.8370
Resistance 1: $1.8260
Current price: $1.8022
Support 1: $1.7950
Support 2: $1.7910
Support 3: $1.7780
Comments: The pound continues to sustain losses. The pair has established a session low which at the moment is the nearest level of support. Below $1,7950 losses of pound can will increase up to $1.7910 (Sep 19 low and also 61,8% FIBO of growth $1,7440-$ 1,8660) and further to $1.7780 (76,4 %). The nearest resistance is located on $1,8260 (Sep 22 low), further follows the channel line of support broken earlier from Sep 11 on $1.8370. Overcoming given marks will open road to $1.8460/70.

Japan's stock indices ended the day lower, ending near the sessions worst levels. The Nikkei 225 was down 149.55 points, or 1.26%, at 11743.61. The broader-based TOPIX was down 20.02 points at 1127.87.

U.S. stocks climbed as speculation Congress will agree on a $700 billion bank bailout spurred a last-hour rally in financial shares, paring losses in the worst week for the Standard & Poor's 500 Index since May.
Bank of America Corp. climbed 6.8 percent and JPMorgan Chase & Co., which raised $10 billion in a stock sale today, advanced 11 percent, helping the Dow Jones Industrial Average recover from a 153 point tumble. Research In Motion Ltd. slid the most in eight years, dragging down the Nasdaq Composite Index, after forecasting earnings that trailed analysts' estimates.
``There's no question a deal will get worked out and it will ultimately be what the market needs,'' said Julie Van Cleave, who manages $4 billion in Milwaukee as head of large-cap growth stocks at DWS Investments, a unit of Deutsche Bank AG.
The S&P 500 increased 3.83 points, or 0.3 percent, to 1,213.01. The Dow jumped 121.07, or 1.1 percent, to 11,143.13. The Nasdaq Composite Index dropped 3.23, or 0.2 percent, to 2,183.34. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, added 0.1 percent to 12,347.03.
The S&P 500 pared its weekly decline to 3.4 percent and the Dow trimmed its loss for the week to 2.2 percent. Stocks climbed for the first time in four days yesterday as speculation grew that Congress would reach agreement on the bank bailout plan, before negotiations stalled last night after the close of trading.
Losses Reversed
Benchmark indexes crept higher from their morning lows as lawmakers expressed optimism that a bailout would be passed. President George W. Bush predicted Congress will resolve any disagreement and Democratic and Republican leaders vowed to keep the House and Senate in session until a deal has been reached.
``I don't think you can overstate the importance of getting the deal done, and the market really wants to see this happen,'' said Jeffrey Kleintop, chief market strategist at LPL Financial in Boston, which oversees $273 billion.
Financial companies in the S&P 500 rose 3.2 percent after falling by about the same amount in the morning. Wells Fargo & Co., the biggest bank on the U.S. West Coast, climbed $3.19 to $37.31.
Earlier declines in banks were also spurred by the collapse of Washington Mutual Inc., once the nation's largest savings and loan. WaMu was seized by regulators last night and forced to sell its branches to JPMorgan, which became the largest U.S. bank by deposits as a result of the deal.
JPMorgan gained the most in the Dow average, advancing $4.78 to $48.24 Bank of America Corp. increased 6.8 percent to $36.70.

The yen rose against the dollar and posted its biggest weekly gain since May as U.S. lawmakers disagreed over a financial rescue and Washington Mutual Inc. became the nation's biggest bank to collapse.
Japan's currency also strengthened against the euro and the Brazilian real after a group of Republicans opposed to the Treasury's $700 billion asset-purchase plan submitted an alternative proposal, prompting investors to reduce holdings of higher-yielding assets funded in Japan.
``The risk-aversion trade is back on, but it's not huge,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``You never know what the next headline will be. The talk is that they will eventually pass the package in some shape or form.''
The yen rose 0.4 percent to 106.18 per dollar at 4:07 p.m. in New York, from 106.56 yesterday, extending this week's gain to 1.2 percent. The yen increased 0.4 percent to 155.14 per euro, from 155.68, and was up 0.2 percent for the week. The dollar traded at $1.4610 per euro, compared with $1.4609. It has depreciated 1 percent since Sept. 19.
President George W. Bush said in a statement today that Congress will overcome any disagreement and approve a financial rescue, while Alabama Senator Richard Shelby, the top Republican on the Banking Committee, said he's willing to let U.S. stock markets open Monday without an agreement.
Stronger Yen
The yen gained 1.9 percent to 57.43 versus the real today and 1 percent to 88.15 against the Australian dollar on speculation investors will exit trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 4.25 percent in Europe, 7 percent in Australia and 13.75 percent in Brazil.
``Safe-haven trades are back on,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``No one is committed to big positions.''
Currency traders are reluctant to put on big bets because it's unclear when Congress will pass the bailout, according to Paresh Upadhyaya, who helps manage $50 billion in currency assets as a Boston-based senior vice president at Putnam Investments.
``These are not the right times to be putting on any bold trades because it's the perfect environment for getting whipsawed,'' said Upadhyaya. ``I think waiting on the sidelines is probably the most prudent thing to do.''
After reaching a one-year low of $1.3882 on Sept. 11, the euro has traded in a range of $1.4437 to $1.4866 this week. It reached the all-time high of $1.6038 on July 15.
Futures contracts on the Chicago Board of Trade showed traders were certain the Fed would reduce the 2 percent target rate for overnight lending between banks by Oct. 29. There's a 66 percent chance policy makers will cut by a quarter-percentage point and 34 percent odds of a half-point decrease. Traders priced in a 68 percent likelihood of no change a week ago.
Economic Growth
The U.S. economy expanded at an annual rate of 2.8 percent in the second quarter, slower than the previous estimate, the Commerce Department said today. Reports showed yesterday sales of new homes fell in August to a 17-year low and orders for durable goods dropped more than forecast.
``The economy is slowing, and an interest-rate reduction will take its toll on the dollar, said RBS's Ruskin. ``We are in an early stage of a downturn, which will last for many, many months.''

Resistance 3: Y109.00
Resistance 2: Y108.00
Resistance 1: Y107.00
Current price: Y106.20
Support 1: Y106.20
Support 2: Y105.00
Support 3: Y103.70
Comments: The greenback gained against the yen as Senate Majority Leader Harry Reid said the House of Representatives may consider the plan today and the Senate will vote by Oct. 1. The yen weakened on speculation an agreement on the U.S.'s rescue plan will restore confidence among investors to buy higher-yielding assets financed in Japan. Resistance is around session high on Y107.00, then – at Friday’s high on Y108.00. Support is around Y106.20 and then on Friday’s low on Y105.00/10. Stronger support at Y103.70 (trend line from Mar 17).

Resistance 3: Chf1.1120
Resistance 2: Chf1.1050
Resistance 1: Chf1.0980
Current price: Chf1.0985
Support 1: Chf1.0800
Support 2: Chf1.0680
Support 3: Chf1.0610
Comments: Monday will bring some important news from the US, including Aug personal spending and Core PCE price index. Overnight USD/CHF tested 50 % Fibo on Chf1.0980 (decline from Friday’s high on Chf1.1280 to Chf1.0680), but failed to break above. Next band of resistance is around Chf1.1050/60 (61.8 and further – on Chf1.1120. Support comes at Thursday’s low on Chf1.0800, stronger – at Chf1.0680 (Sep 22 low).

Resistance 3: $1.8660
Resistance 2: $1.8460
Resistance 1: $1.8370
Current price: $1.8235
Support 1: $1.8270
Support 2: $1.8200
Support 3: $1.8120
Comments: The British pound dropped to one-week lows versus the dollar as European governments intervened to prevent the failures of Bradford & Bingley Plc, Britain's biggest lender to landlords, and Fortis, the largest Belgian financial-services firm. The pound fell as Bradford & Bingley became the third major British bank to run into trouble since global credit markets seized up last year. Northern Rock Plc was nationalized in February and HBOS Plc sold itself to Lloyds TSB Group Plc on Sept. 18. Currently GBP/USD tests key support ay $1.8270 (50% Fibo of the $1.7920 - $1.8640 gain). Below the pound’s weakness may extend to $1.8200 (61.8 and $1.8120. Resistance is around earlier broken channel support line from Sep 11 on $1.8370. Back into the channel will target $1.8460/70 and then – to recent high s on $1.8640/60.

Resistance 3:$1.4760
Resistance 2: $1.4670
Resistance 1: $1.4560
Current price: $1.4460
Support 1: $1.4490
Support 2: $1.4420
Support 3: $1.4360
Comments: The dollar rose Monday as President George W. Bush and Congressional leaders agreed a $700 billion plan to revive credit markets by purchasing distressed debt from banks. The euro also weakened as Belgium, the Netherlands and Luxembourg invested 11.2 billion euros ($16.3 billion) in Fortis to restore confidence in the company after its shares fell 35% last week. Fortis came under pressure because of speculation the bank would struggle to replenish capital depleted by the 24.2 billion euro takeover of ABN Amro Holding NV units last year and credit writedowns. Currently EUR/USD challenge strong support zone between $1.4480/90 (channel line from Sep 11). Break under will open the way to $1.4420 (61.8% of the $1.4150 - $1.4860 move). Next band of suppor is around $1.4360. Resistance comes at session high on $1.4560, then - between $1.4670/80. Above there is a chance to recover up to $1.4760 (Sep 25 high).

High Low Close
EUR/USD 1.4677 1.4533 1.4610
USD/JPY 106.52 105.00 106.15
GBP/USD 1.8467 1.8333 1.8417
USD/CHF 1.0911 1.0827 1.0903

EUR/JPY 155.79 153.44 155.09
EUR/GBP 0.7966 0.7917 0.7930
GBP/JPY 195.82 193.15 195.48
GBP/CHF 2.0101 1.9942 2.0083

Change % Change Last
Nikkei 225 -23,19 -0.19% 11 983,34
Topix -0,96 -0,08% 1 152,99
FTSE -108.55 -2.09% 5,088.47
DAX -109.53 -1.77% 6,063.50
CAC -63.43 -1.50% 4,163.38
Dow +121.07 +1.10% 11,143.13
NASDAQ -3.23 -0.15% 2,183.34
S&P +3.83 +0.32% 1,213.01
10yr Note -0.3500 -0.091% 3.827%
NYMEX Crude Oil -1.13 -1.06% 106.89
Gold +6.50 +0.73% 888.50

08:30 UK M4 money supply (August) final 1,4%
08:30 UK M4 money supply (August) final Y/Y 11,5%
08:30 UK M4 lending (August) final, bln +22,0
08:30 UK Consumer credit (August), bln +1,1 +1,1
09:00 Е15 Economic sentiment index (September) 88,8
09:00 Е15 Business climate indicator (September) -0,21
12:30 USA Core Personal Consumption Expenditure - Prices Index (Aug) 0,3%
12:30 USA Core Personal Consumption Expenditure - Prices Index (YoY) (Aug) 2,4%
12:30 USA Personal Income (MoM) (Aug) -0.7%
12:30 USA Personal spending (August) 0.2%
23:01 UK Gfk consumer confidence (September) -40 -36
23:30 Japan Unemployment (August) 4,0%
23:30 Japan Household spending (August) real Y/Y -0,5%
23:50 Japan Industrial output (August) preliminary Y/Y 2,4%
23:50 Japan Industrial output (August) preliminary 1,3%