Break the Glass: So Far, 'Rescue Plan' Short on Rescue, Plan

A few months ago, "Is it safe?" was the question many investors were asking. As in, is it safe to get back into the market?

After Thursday's rout, many are asking: "Is anything safe?"

News of the Senate's passage of a pork-laden $700 billion bailout package landed with a resounding thud Thursday, with the Dow losing 348 points, or 3.2%. The S&P shed 4% and the Nasdaq tumbled 4.5%.

Stocks weren't the only asset class in retreat as a whiff of deflation entered the financial landscape. Ironically, then-Fed governor Ben Bernanke's fear of deflation paved the way for the Fed's ultra-easy monetary policy earlier this decade, which of course contributed mightily to the housing boom and, thus, our current mess. (But let's not go there now -- other than to note it's dawning on market participants how the same people who got us into this predicament are the ones charged with resolving it.)

If not outright deflation, the markets were all singing the same tune of disinflation and slowing growth, as evinced in transportation stocks like Conway (which warned) and commodity producers like Monsanto (downgraded by Merrill).

Commodities themselves, including gold, also stumbled while the credit market freeze deepened, as Bloomberg reports: "Interest rates on three-month dollar loans rose to a nine-month high, short-term corporate borrowing fell by the most ever and leveraged loans tumbled, exacerbating the credit freeze that's paralyzing businesses around the world."

Alarmingly, "the credit disaster has moved to a new, more intense level," as one fixed-income specialist put it, despite the Senate's bailout vote and actions by policymakers worldwide, including hints of a coming rate cut from the ECB.

Fears of a credit squeeze hampering access to capital of "real economy" firms hammered shares of industrials like Caterpillar and GE, which does have a big financing arm and had to slash the price of its $12 billion emergency stock offering, as Henry Blodget reports.

Indeed, about the only green on most traders' screens today was the dollar and almighty Treasuries, whose perceived safe-haven status continues to lure buyers despite rock-bottom yields.

Needless to say, this is precisely the kind of market action that compelled Bernanke and Hank Paulson to unveil their rescue effort two weeks ago.

The House is slated to vote on the bill tomorrow, but so far anything touched by the "break the glass" package has been bloodied.