Financials Down, Not As Much As Broader Market (FRIDAY NEWS)
(Recasts lede, adds more details to Bush comments, updates stock movement throughout.)
DOW JONES NEWSWIRES
Financial stocks were putting in the best performance of the day amid another broad drubbing as the stock-market crash continues, with investment banks getting pummelled but many regional banks and insurers managing to stay strongly in the black as confidence rose.
The financial sector of the S&P 500 was recently down 3.5%, roughly half the decline of the next-worst performer
The relatively good performance comes as the U.S. is weighing two dramatic steps to repair ailing financial markets: guaranteeing billions of dollars in bank debt and temporarily insuring all U.S. bank deposits. Such moves would mark the government's most extensive intervention yet in the financial system.
International markets tumbled again Friday to close a dreadful week, and U.S. bourses were following suit. Major averages have fallen more than 20% the past seven trading days through Thursday, when the Dow Jones Industrial Average closed below 9000 for the first time since 2003, which wiped out the bulk of its gains from the last bull market.
This week's slow-speed crash has been driven by deepening fears about the banking system and the spillover effects it may have on the rest of the economy. The market rout rapidly is wiping out vast amounts of wealth, casting a pall over households and businesses.
Morgan Stanley (MS) was recently down 39% to $7.64. The drop comes on top of a 26% plunge Thursday despite Mitsubishi UFJ Financial Group Inc. (MTU) again reiterating its commitment to inject capital in the investment bank. Investors have been worried about the deal because Mitsubishi's purchase price is $25, more than triple where Morgan Stanley is trading now. The stock is down 86% this year, having plunged to a 14-year low.
The latest downdraft came as Moody's Investors Service said it might cut the credit ratings of Morgan Stanley while taking the first step for such action against Goldman Sach Group Inc. (GS), citing capital-market woes that could impact results for some time.
Goldman - which along with Morgan Stanley is being converted to a bank-holding company model - dropped 17% to $84.34. The investment bank has raised $10.75 billion in capital - $5 billion of it from Warren Buffett - which Moody's said helped. Still, the ratings firm and investors are worried about how the financial-markets crisis will hurt what has long been a strong company.
Merrill Lynch & Co. (MER), the investment bank being acquired by Bank of America Corp. (BAC), had declined premarket along with Bank of America but edged up 0.3% to $13.36 while Bank of America rose 2.5%. Fellow big bank JPMorgan Chase & Co. (JPM) climbed 6%.
Citigroup Inc. (C) was up 3.6%. On Thursday, it said it would walk away from its efforts to buy Wachovia Corp.'s (WB) banking operations, clearing the way for Wells Fargo & Co. (WFC) to purchase the entire beleaguered bank. Wells Fargo declined 3.4%, while Wachovia surged 23%.
General Electric Co. (GE) slid 0.9% after the company reported earnings that met lowered expectations given its warning two weeks ago, but nonetheless highlighted how much the conglomerate has been hurt by troubles at its large financial arm. The stock hit an 11-year low Thursday as shareholders have been pounding the economic bellwether.
Other financial sectors that have seen heavy sell-offs over the past week include regional banks and insurance firms exposed to the debt and stock markets. Investors are worried regional banks won't be able to handle the financial crisis as well as their larger counterparts - especially given that the large banks, for the most part, are struggling with it.
But most regional banks rose Friday, with KeyCorp (KEY) seeing the largest gain at 9.7%. However, embattled regional bank National City Corp. (NCC), which spent the morning slightly up, turned lower as the day went on and was recently down 12%. Thursday, The Wall Street Journal said the bank has put itself on the block.
Meanwhile, insurance companies were mixed. Some rose as XL Capital Ltd. (XL) and Lincoln National Corp. (LNC) unveiled their projected investment losses for the third quarter. XL Capital jumped 24%, while Lincoln National rose 9%. Prudential Financial Inc. (PRU) was up 5.2% and recovered some of its 23% drop Thursday, when it revealed its expected third-quarter losses. And MetLife Inc. (MET), which also gave third-quarter projections earlier this week, rose 1.1%.
But Genworth Financial Inc. (GNW), which had earlier gained as much as 20%, was recently down 9.2%. And Progressive Corp. (PGR), whose investment losses led it to swing to a third-quarter net loss, fell 11%.
Meanwhile, American Capital Ltd. (ACAS), the only private equity fund in the S&P 500, dropped 18% to $10.95.
Student-lending giant SLM Corp. (SLM) was the best-performing stock in the financial sector of the S&P 500, recently up 28% after the Bush administration Friday said it is taking steps to support the student-loan market amid the financial crisis.
-By Donna Kardos, Dow Jones Newswires; 201-938-5963; donna.kardos@dowjones.com
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(END) Dow Jones Newswires
October 10, 2008 14:22 ET (18:22 GMT)
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