The markets closed sharply lower on Friday as Wall Street gazed warily beyond passage of the highly sought after $700 billion financial rescue plan. 

The afternoon selloff capped more than two weeks of high drama surrounding the rescue bill, and underscored the fears harbored by many investors that the U.S. economy will slip into a recession. 

Today's Market

The Dow Jones Industrial Average slid 157.47 points, or 1.50%, to 10325.38. The broader S&P 500 Index lost 15.05 points, or 1.35%, to 1099.23 while the Nasdaq Composite fell 29.33 points, or 1.48%. to 1947.39. The consumer-friendly FOX 50 dropped 13.66 points, or 1.63%, to 822.67.

Friday's rollercoaster trading session ended in disappointment, leaving the Dow more than 450 points away from the day's highest point. Still, the selloff likely wasn't an indictment of the rescue plan. Instead, it was an indictment of the economic situation that necessitated a rescue in the first place. 

“We know it’s not a silver bullet. It’s not something we wanted, it’s something we needed,” said Art Hogan, chief market strategist at Jefferies & Co. He said he wasn’t surprised the markets didn’t rally as that would be akin to “celebrating when the ambulance has arrived.”

Citigroup (C) plummeted as much as 20% on Friday, leading the way down on the Dow after Wells Fargo (WFC) one-upped Citi by unveiling a buyout of Wachovia (WB). Financial giants JPMorgan Chase (JPM) and Bank of America (BAC) closed sharply lower as well. Drug giant Merck (MRK) and Wal-Mart (WMT) were the biggest percentage winners on the Dow. 

No Bailout Bounce on Wall Street

Market observers blamed steep declines, which began in the moments after the House of Representatives signed off on the controversial bill, on a series of factors, including “profit-taking,” the fact that the result of the vote was expected, and the gloomy economic outlook.

“It's not like throwing a light switch. The underlying economic news continues to be weak," NYSE trader Ted Weisberg of Seaport Securities told FOX Business. "It does not happen overnight. Now the hard work begins.”

Traders on the New York Stock Exchange were glued to television screens monitoring the historic vote in the House. After the House passed the bill 263 to 171, President Bush quickly signed the legislation into law. Earlier in the week the House defeated the measure, sending the Dow to its worst point loss in history. 

“It's very, very good news for the economy and good news for everybody. I think you saw some profit-taking. I think we [will] close up on the day," said Anthony Conroy, head trader at BNY ConvergEx. 

The bill authorizes the Treasury to buy and hold up to $700 billion of toxic assets stuck on banks' balance sheets. The Bush administration and other supporters said the rescue plan is needed to unlock the credit markets and prevent a financial catastrophe. 

“It was expected that the bill was going to pass. Traders have been programmed to sell any rallies and that’s what we’ve seen happen," said Michael James, senior equity trader at Wedbush Morgan Securities. 

While it's not yet clear if the rescue plan will achieve its goal of unlocking the credit markets, its passage in Congress removed a major question market hanging over Wall Street. The markets will likely shift their attention from the horse-trading in Congress to effectiveness of the rescue plan. 

"What’s going to be key is the performance of the credit markets. Will the credit markets loosen at all given the passage of this bill? Will we see any increase in the willingness of banks to lend?" said James. 

Ugly Jobs Report 

While the markets had little reaction to the all-important jobs report when it was released Friday morning, its significance clearly weighed on market sentiment by the end of the day. 

The Labor Department said non-farm payrolls by 159,000 last month -- the worst monthly performance since March 2003. Economists had expected a more modest decline of 100,000 jobs. The government also said the unemployment rate held steady at 6.1%. 

The jobs report is considered one of the most important indicators of the economy, often setting the tone for the markets for the remainder of the month. 

The markets also reacted to a new report that showed the U.S. service sector barely expanded in September. The Institute for Supply Management’s non-manufacturing index fell to 50.2 last month from 50.6 in August. A reading above 50 indicates growth.  

Friday's reports follows in a string of bearish economic reports in recent days, including ones showing contracting manufacturing activity, plummeting auto sales and the steepest home price declines on record. 

Wachovia's Love Triangle 

Meanwhile, the nation's financial landscape continues to change at warped speed. 

Wells Fargo (WFC) unveiled a $15.1 billion deal to acquire Wachovia (WB), trumping a government-assisted offer by Citigroup (C) to acquire Wachovia's banking operations. The Wells Fargo offer didn't require government aid and includes all of Wachovia's businesses and obligations, including deposits, debt and preferred equity. 

The surprise offer, which has already been approved by the boards of Wells Fargo and Wachovia, is valued at approximately $7 per share. Shares of Wachovia surged as much as 80% on Friday while Wells Fargo's stock gave back early gains to close lower. 

The Wells Fargo offer could set up a potential legal battle between it and Citigroup, which demanded that Wachovia and Wells Fargo terminate the proposed transaction, claiming the new offer is a clear breach of an exclusivity agreement. 

Friday's trading session followed in a pattern of extremely turbulent action on Wall Street, including three selloffs that ripped more than 1,200 points from the Dow. The S&P 500 suffered its worst week since September 2001. 

In the commodities markets, crude oil prices closed 28 cents lower at $93.01 a barrel while gold futures fell $11.10 to $833.20 an ounce.

Corporate Movers

Apple (AAPL) denied Internet rumors that CEO Steve Jobs has had a heart attack. 

UBS (UBS) announced plans to scale back its investment banking business and slash 2,000 jobs. The Swiss bank, which reported a small profit a day ago, has already cut 4,100 investment banking jobs this year. 

American International Group (AIG), the insurance giant that needed an $85 billion lifeline from the government last month, announced plans to focus its business on property, casualty and foreign general insurance. AIG said it plans to sell its other businesses in an effort to pay back the $85 billion loan.