updated 11/4/2008 1:25:04 PM ET 2008-11-04T18:25:04

After months rife with uncertainty and unprecedented events that have roiled and reshaped Wall Street, at least one major unknown should be cleared up Tuesday — who will be the next U.S. president.

Major Market Indices

Investors took a weak economic report from the Commerce Department in stride as the prospect of a resolution to the nearly two-year campaign for the White House sent the Dow Jones industrial average up more than 250 points in early afternoon trading.

Still, September factory orders fell 2.5 percent from August, the department said, more than three times the drop analysts expected. Excluding autos and aircraft, orders fell 3.7 percent, the steepest drop since 1992, when the department began tracking sector-specific changes.

The weakness was led by a heavy drop in nondurable goods orders, which fell 5.5 percent. That includes a 17 percent drop in the value of petroleum and coal products, reflecting the decline in oil prices in September. Oil has fallen by more than half from its record level of $147 a barrel in July.

David Resler, chief economist for Nomura Securities, said the Commerce Department report "is a bit less alarming" than the overall number indicates given that much of the decline is due to the oil price drop.

But orders for non-defense capital goods excluding aircraft, considered a good indication of business investment plans, fell by 1.5 percent. That follows a 2.3 percent drop in August and indicates companies are cutting back on investments, likely due to the economic downturn and difficulty getting credit.

The factory orders report comes a day after the widely watched Institute of Supply Management gauge of manufacturing activity plunged in October to its lowest level since the country's last deep recession, the 1981-82 downturn.

And automakers reported terrible October sales figures on Monday. Sales sank 45 percent at General Motors Corp., 30 percent at Ford Motor Co., 25 percent at Honda Motor Co. and 23 percent at Toyota Motor Corp.

"We are now deep in the belly of the recession beast," said Bernard Baumohl, managing director of the Economic Outlook Group.

The government reported last week that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 0.3 percent in the July-September quarter. Two straight quarters of lower GDP generally mean a recession, and many economists expect the fourth quarter to be worse than the third.

Separately, the government, raising cash to pay for the array of financial rescue packages, said Monday it plans to borrow $550 billion in the last three months of this year. Treasury Department officials also projected the government would need to borrow $368 billion more in the first quarter of 2009, meaning the next president will confront an ocean of red ink.

The nonpartisan Committee for a Responsible Budget estimates all the government economic and rescue initiatives, starting with the $168 billion in stimulus checks issued earlier this year, total even more — an eye-popping $2.6 trillion.

Besides the borrowing numbers, Treasury released estimates by major Wall Street bond firms projecting that total borrowing for this budget year, which began Oct. 1, will total $1.4 trillion, nearly double the previous record.

Major Wall Street firms were equally pessimistic about the size of the federal deficit this year. They projected it will hit $988 billion for the current budget year, more than twice the record. In July, the administration projected a deficit for this year of $482 billion, but that was before the financial crisis erupted in September.

Supporters of the government rescue packages argue that the ultimate cost to taxpayers should end up being a lot smaller, partly because the Federal Reserve is extending loans to banks that should be paid back.

And in the case of the $700 billion rescue package, the government is buying assets — either bank stock or distressed mortgage-backed assets — that it hopes will rebound in value once the crisis has passed.

But the government still needs to borrow massive amounts to buy the assets, an effort that has driven up borrowing costs to levels never before contemplated.

A separate report Monday from the Fed showed banks tightened standards on all sorts of loans, from home mortgages to credit cards and business loans in early October, compared with three months ago, showing the credit squeeze had yet to let up.

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