NEW YORK — Elation in the financial markets over the $700 billion bank bailout plan evaporated Monday and was replaced by all-too-familiar anxiety, pummeling stocks and sending oil prices to their biggest one-day gain.
Worries that the rescue package would cost too much, drive up inflation, swell the already-bloated deficit and hurt the ailing economy also led global investors to flee the U.S. dollar.
The Dow Jones industrials lost 372 points, wiping out the gains the index made Friday after administration officials and congressional leaders promised swift action to get bad debt off the books of banks and end the financial crisis.
"Investors had a weekend to look at the news that was streaming out, and they are now finding fault in it," said Joseph Battipaglia, market strategist in the private client group at the investment firm Stifel Nicolaus.
Oil prices briefly spiked more than $25 a barrel before falling back and settled at $120.92, up $16.37, on the New York Mercantile Exchange. That shattered the previous record for a one-day jump in crude oil, $10.75.
Monday also was the last day for investors to trade the October oil futures contract, adding fuel to the rally. But the November contract also saw a sharp gain, up $6.62 to $109.37.
The government agency that regulates commodities markets said it was working with Nymex to "ensure that no one is taking advantage of the current stresses facing our financial marketplace for their own manipulative gain."
The Commodity Futures Trading Commission said in a statement that it was "closely monitoring today's large movement in the price of crude oil."
Analysts said some of the gain could have come from large investors trying to cover short positions, or bets that prices would fall.
Investors want detailsFour days after word of a massive government rescue plan began to hit the market, investors had little by way of details. Treasury Secretary Henry Paulson introduced the plan Saturday in a document that ran less than three full pages.
By Monday, investors still knew little about how the Bush administration would pay for mopping up the bad debt, how the process would work, who would run it and what the Democratic-controlled Congress would ask for to approve the plan.
The Bush administration is already forecasting that the federal deficit will hit a record $482 billion next year.
Analysts say the bailout costs mean a $1 trillion annual deficit is not out of the question.
"When you try to print $1 trillion, that will kill your currency, lifting oil prices, which then in turn will not help the stock market," said Gary Kaltbaum, who runs the money management firm Kaltbaum and Associates in Orlando, Fla.
"It is a vicious cycle, and we are seeing that right now."
Lacking specifics, many investors, especially foreigners, sold U.S. dollars on worries that paying for the plan would increase the federal deficit and exacerbate inflation. Over the past year, overall inflation is at 5.4 percent.
The 15-nation euro rocketed past $1.48 in late afternoon trading Monday, up more than 3 cents from Friday in its largest single-day move against the dollar since the European currency was introduced in 1999.
The British pound leaped to $1.8584 from $1.8365, and the dollar dropped to 105.40 Japanese yen from 107.01.
The price of gold, a traditional safe-haven investment in times of financial turmoil, rose $40.30 and settled at $909 an ounce.
The Dow finished at 11,015.69, down 372.75 points, more than 3 percent.
The sharp drop was reminiscent of last week's wild trading, which included two days of 400-plus-point drops for the Dow and two days of 300-plus-point increases.
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