Energy stocks sagged across the board Monday after the House in a historical vote narrowly rejected the Bush administration’s plan for a massive federal government intervention in the Wall Street financial markets.
Despite calls by House leaders of both parties to support the 110-page proposal, 133 Republican lawmakers and 95 Democrats voted against handing Treasury Secretary Henry Paulson a $700 billion check to purchase the troubled assets of major investment banks. The final vote was 205 in favor of the rescue plan (HR 3997) and 228 against it.
Minority Leader John Boehner (R-OH) said House Speaker Nancy Pelosi’s (D-CA) partisan speech during the debate “poisoned” the atmosphere and caused a “number of members…to go south.” Paulson, the chief architect of the Bush administration bailout plan, “just got his rejection notice from Congress,” said another lawmaker.
It was unclear whether the Bush administration and House leaders would seek another vote. The House has adjourned for two days in observance of a Jewish holiday. Some believe the post-vote steep drop in stocks and other market disruptions may convince the House leadership to take up the measure again later this week.
The House defeat sent the markets into a nosedive — the Dow Jones Industrial fell 777.68 points; the S&P Index was down 106.85 points; while Nasdaq fell 199.64 points for the day.
The stock of some independent oil and gas producers sank. Newfield Exploration was down by more than 13.29%; Devon Energy fell 9.682%; and Cabot Oil and Gas slumped 13.22%. Shares of Oklahoma City-based Chesapeake Energy, the largest domestic producer of natural gas, fell to a new 52-week low of $32.26 on Monday, down by 15% or $5.60/share.
The stock of major producers — ExxonMobil, Royal Dutch Shell, Chevron and BP — slipped but by lesser amounts. The biggest loser in the major producer group was BP, whose stock dipped by nearly 10%.
Shares of natural gas pipeline companies also ended Monday lower, with The Williams Companies (down by more than 13.3%) and El Paso Corp. (down 13.1%) experiencing the biggest hits.
Pittsburgh-based Equitable Resources had the largest stock slump in the gas utility group (down 10.67%). The electric utility sector — such as Southern Co., Dominion Resources and Duke Energy Corp. — was minimally impacted. FPL Group suffered the largest share decline of 6.83%.
Energy commodities also took a hit Monday as the economy concerns translated into energy demand reduction calculations. November crude, which closed at $106.89/bbl on Friday, dropped $10.52 (10%) on Monday to finish the regular session at $96.37/bbl. In their first regular session action as front-month, November natural gas futures dropped 40.7 cents (5%) to close at $7.221 (see related story).
“This is a tough vote,” said Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee and one of the chief House negotiators of the rescue plan, to lawmakers prior to the vote.
“If we defeat this bill today, it will be a very bad day” for the markets, he said. Frank warned that failure to pass the measure would lead to a “much more dismal” economic picture in the near term.
In other Capitol Hill action, the outlook for passage of the $17-18 billion package of extensions of tax credits for renewable energy and energy efficiency looks especially bleak. “Senate Democratic leadership has spent the morning [Monday] begging the House to consider the Senate-amended HR 6049 and move the alternative minimum tax fix, the energy renewables tax extensions and the expired research and development and other tax credits before adjourning,” said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co.
But “it appears that the tax legislation debate is being shelved this week and it looks set to languish until after the elections under the best of scenarios,” they said. “After the political sniping concludes in November, it may be easier to strike a deal.”
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