The House took a day to mull the Senate's sweetened financial rescue bill before a Friday vote, and the legislation's prospects improved, although there were still hold outs (see photo, right).
Meanwhile, investors feared that the economy needed a boost beyond the government's plan. Economic reports showed signs of continued weakness Thursday. Weekly jobless claims soared to a seven-year high Thursday, alarming investors ahead of Friday's big monthly report. And factory orders slumped to a 2-year low.
Fearing a weakening economy would further quash demand for petroleum products, oil prices fell more than $4. The Dow closed down 348 points.
Fears of a recession only made the stranglehold on credit even tighter. Key measures of lending showed banks hoarding cash with an historically high aversion to risk.
As a result, analysts and economists began to predict that the Federal Reserve would cut its key funds rate by as much as a half percentage point to boost liquidity in the markets, in an attempt to stave off a recession.NEXT: Friday, Oct. 3 - Bailout becomes law