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HIGHLIGHTS-Bernanke's testimony on economic outlook
10/20 10:20 AM
(Updates with quote on Fannie Mae (FNM:$0.9698,$0.0198,2.08%) and Freddie Mac (FRE:$1.09,00$-0.0600,-5.22%) )
WASHINGTON, Oct 20 (Reuters) - U.S. Federal Reserve
Chairman Ben Bernanke testified on the economy's outlook and
financial markets to the House Budget Committee on Monday.
Following are highlights from his prepared testimony and
the question and answer session. For the text of Bernanke's
prepared testimony, see [ID:nN20511434]
From question and answer session:
HOW FANNIE MAE AND FREDDIE MAC COULD HELP MORTGAGE MARKETS:
"In particular, Fannie and Freddie, the stabilization of
those two companies, I think despite some run-up in mortgage
rates last week, I do think will provide more credit, more
available credit for homeowners going forward. Congress of
course has just passed the Hope for Homeowners bill which
allows troubled mortgages to be written down in terms of
principal and renegotiated and refinanced into the Federal
Housing Administration. Further steps could be taken along
those lines, if the Congress wished to. The Congress could also
further support Fannie and Freddie's funding and address some
of the costs that they face in order to make more credit
available to the mortgage market."
From prepared testimony:
ON THE FINANCIAL RESCUE LEGISLATION
"I am confident that these initiatives, together with other
actions by the Treasury, the Federal Reserve, and other
regulators, will help restore trust in our financial system and
allow the resumption of more-normal flows of credit to
households and firms.
ECONOMIC OUTLOOK
"The stabilization of the financial system, though an
essential first step, will not quickly eliminate the challenges
still faced by the broader economy. ... The pace of economic
activity is likely to be below that of its longer-run potential
for several quarters."
INFLATION OUTLOOK
The effects of surging commodity prices on consumer costs
"are now reversing in the wake of the substantial declines in
commodity prices since the summer. Moreover, the prices of
imports now appear to be decelerating, and consumer surveys and
yields on inflation-indexed Treasury securities suggest that
expected inflation has held steady or eased. If not reversed,
these developments, together with the likelihood that economic
activity will fall short of potential for a time, should bring
inflation down to levels consistent with price stability."
GSE regulator to set conforming loan limits by Nov 7
10/17 03:32 PM
WASHINGTON, Oct 17 (Reuters) - The regulator of housing finance firms Fannie Mae (FNM:$0.97,00$-0.02,00-2.02%) and Freddie Mac (FRE:$1.12,00$-0.04,00-3.45%) said on Friday it would announce by Nov. 7 the 2009 limits on the maximum loan size of mortgages the agencies can buy.
Under the housing bill passed in July, the Federal Housing Finance Agency was directed to set conforming loan limits each year for the nation as a whole as well as for high-cost areas.
In high-cost areas, Fannie and Freddie will be permitted to purchase mortgages valued at 115 percent of the local median prices, up to a maximum of 150 percent of the national limit. That means if the national limit remains at $417,000 next year, the limit in high-cost areas would be $625,500. (emily.kaiser@thomsonreuters.com; +1 202 310 5444; Reuters Messaging: emily.kaiser.reuters.com@reuters.net))
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy...-Warren Buffet
...I get a funny feeling. It's good...
I like it when the stock price goes up...
You mean to say this cpmpany doesn't deal with nuclear waste?
Grate Post!
Posted by: obiteridctum Date: Friday, October 17, 2008 10:18:38 AM
In reply to: WarProfiteer who wrote msg# 10353 Post # of 10364
Warren Buffet - October 17, 2008
New York Times Online - Opinion
Buy American. I Am.
By WARREN E. BUFFETT
Published: October 16, 2008
Omaha
THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.
A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.
Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”
I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.
Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.
Fed's Bernanke:Not Repeating Great Depression Mistakes
10/15 02:07 PM
By Michael S. Derby
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Federal Reserve Chairman Ben Bernanke said Wednesday a repeat of the experience of the Great Depression is unlikely, due to key differences in how policymakers responded to problems then and now.
Against all the recent market and economic trouble, "monetary policy has been proactive and aggressive and we have moved quickly and early to try to stabilize the financial system," Bernanke said.
Meanwhile, "we didn't wait for three and a half years as the financial market collapsed to take strong action," he said.
What's been done so far by the Fed and the government represent "powerful steps" and officials have avoided the "critical errors" made by leaders in the 1930s, Bernanke said.
The Fed chairman's comments came in response to questions following a speech before the Economic Club of New York. He spoke in the wake of a flurry of aggressive actions by the government to restart the nation's financial system, in an effort done in conjunction with the governments of other major nations.
A key part of that wide response included an emergency half-percentage-point rate cut by the Fed last week. While equity markets remain under pressure, signs some parts of the credit market may be starting to perform better have market participants debating whether further rate cuts will be needed.
In his formal remarks, Bernanke said the Fed would use every tool at its disposal to revive markets, and the central bank "will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity." He also said it will take some time for both the markets and the economy to recover from the impact of recent events.
The central bank chairman appeared to describe an environment where the Fed could cut rates again, and he noted those who believed aggressive rate cuts over recent months would end badly have been proved wrong.
"There was a lot of concern and skepticism that our actions might lead us into stagflation or inflation," Bernanke said, referring to rate cuts that began in late 2007 and continued into this year. He added, "there was also skepticism that the situation was all that serious."
"The evidence is now in that inflation problems are moderating and it looks like we are returning to price stability at a reasonable pace," Bernanke said, in a move that takes away one key factor that had limited the Fed's rate-cutting hand.
But the central banker also cautioned that "monetary policy also has its limits" and that in the face of troubles like those now before the global economy, a full scale government response is what's needed.
Bernanke said another lesson from the market's crisis is that "we have got and developed in this country a very serious too big-to-fail problem" within the financial system. While the banking system is diverse, "there are too many firms that are in some sense systemically critical, and that creates problems ... and it creates distortions in that market discipline will break down if everybody believes firm X won't be allowed to fail."
-By Michael S. Derby, Dow Jones Newswires; 201-938-4192; michael.derby@ dowjones.com
(Brian Blackstone contributed to this article.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-15-081407ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Fed's Bernanke:Not Repeating Great Depression Mistakes
10/15 02:07 PM
By Michael S. Derby
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Federal Reserve Chairman Ben Bernanke said Wednesday a repeat of the experience of the Great Depression is unlikely, due to key differences in how policymakers responded to problems then and now.
Against all the recent market and economic trouble, "monetary policy has been proactive and aggressive and we have moved quickly and early to try to stabilize the financial system," Bernanke said.
Meanwhile, "we didn't wait for three and a half years as the financial market collapsed to take strong action," he said.
What's been done so far by the Fed and the government represent "powerful steps" and officials have avoided the "critical errors" made by leaders in the 1930s, Bernanke said.
The Fed chairman's comments came in response to questions following a speech before the Economic Club of New York. He spoke in the wake of a flurry of aggressive actions by the government to restart the nation's financial system, in an effort done in conjunction with the governments of other major nations.
A key part of that wide response included an emergency half-percentage-point rate cut by the Fed last week. While equity markets remain under pressure, signs some parts of the credit market may be starting to perform better have market participants debating whether further rate cuts will be needed.
In his formal remarks, Bernanke said the Fed would use every tool at its disposal to revive markets, and the central bank "will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity." He also said it will take some time for both the markets and the economy to recover from the impact of recent events.
The central bank chairman appeared to describe an environment where the Fed could cut rates again, and he noted those who believed aggressive rate cuts over recent months would end badly have been proved wrong.
"There was a lot of concern and skepticism that our actions might lead us into stagflation or inflation," Bernanke said, referring to rate cuts that began in late 2007 and continued into this year. He added, "there was also skepticism that the situation was all that serious."
"The evidence is now in that inflation problems are moderating and it looks like we are returning to price stability at a reasonable pace," Bernanke said, in a move that takes away one key factor that had limited the Fed's rate-cutting hand.
But the central banker also cautioned that "monetary policy also has its limits" and that in the face of troubles like those now before the global economy, a full scale government response is what's needed.
Bernanke said another lesson from the market's crisis is that "we have got and developed in this country a very serious too big-to-fail problem" within the financial system. While the banking system is diverse, "there are too many firms that are in some sense systemically critical, and that creates problems ... and it creates distortions in that market discipline will break down if everybody believes firm X won't be allowed to fail."
-By Michael S. Derby, Dow Jones Newswires; 201-938-4192; michael.derby@ dowjones.com
(Brian Blackstone contributed to this article.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-15-081407ET
Copyright (c) 2008 Dow Jones & Company, Inc.
I tend to think throwing a few billion at FRE/FNM common and preferred stock would have been very productive for the GOVT. At least it would have bought them and the banks more time. They might have even been able to avoid those counterproductive warrants, which increased everybodys asset write-downs. That didn't happen, but even doing it at this point, would have a positive effect on the market, as well as increasing bank assets, and giving them a chance to get liquid if they choose at reasonable prices, or stay in two monster GOVT MAJORITY OWNED mortgage giants. They almost should at this point, not only to make taxpayers money in the future, but because they truly have screwed stockholders that were in FRE/FNM previous to conservatorship. JMO...
I tend to think throwing a few billion at FRE/FNM common and preferred stock would have been very productive for the GOVT. At least it would have bought them and the banks more time. They might have even been able to avoid those counterproductive warrants, which increased everybodys asset write-downs. That didn't happen, but even doing it at this point, would have a positive effect on the market, as well as increasing bank assets, and giving them a chance to get liquid if they choose at reasonable prices, or stay in two monster GOVT MAJORITY OWNED mortgage giants. They almost should at this point, not only to make taxpayers money in the future, but because they truly have screwed stockholders that were in FRE/FNM previous to conservatorship. JMO...
I hear you, though I do feel for all those that lost. I agree, these two need to increase in value. For America. USA!USA!USA!...
Something big is about to happen to FRE/FNM, IMO. Volume has slowed down dramatically. I been in these long enough to say I have not seen this before with these two. Methinks it will be good. GLTA, except shorts...
News Highlights: Top Equities Stories Of The Day
10/15 01:00 PM
TOP STORIES
US STOCKS DOWN STEEPLY ON GLOBAL ECONOMY WORRIES
Stocks slide and the Dow Jones Industrial Average is down by more than 300 points, below 9,000, as lackluster corporate earnings and another big drop in oil prices feed into fears about the depth of a potential global recession.
BERNANKE SAYS USING ALL TOOLS TO STABILIZE MARKETS
Fed Chairman Ben Bernanke keeps the door open to further interest rate cuts, saying policymakers will keeping using "all the tools at our disposal" to restore stability in financial markets. He also says credit markets will take time to "unfreeze."
JPMORGAN NET PLUNGES 84% ON WRITE-DOWNS
Banking giant's 3Q net tumbles to $527 million, or 11c a share, amid $3.6 billion in write-downs and $640 million in losses from its acquisition of Washington Mutual (WAMUQ:$0.0980,$0.0004,0.41%) , but says profits triple at the investment banking unit. Shares down 1%.
US RETAIL SALES DIVE IN SEPTEMBER
U.S. retail sales take the sharpest drop in three years, diving by 1.2% last month, as consumers sharply cut spending on economic fears. The Labor Department says the producer price index fell 0.4% in September on lower energy prices.
WELLS FARGO (WFC:$34.6400,$1.1200,3.34%) 3Q EARNINGS BEAT EXPECTATIONS
Wells Fargo (WFC:$34.6400,$1.1200,3.34%) posts net of $1.6 billion, or 49c a share, down 23% from the prior year, but better than analysts' forecasts of 41c a share. Earnings are hurt by troubled investments in Fannie Mae (FNM:$1.03,00$-0.07,00-6.36%) , Freddie Mac (FRE:$1.1600,$-0.0900,-7.20%) and Lehman Brothers (LEHMQ:$0.0850,$-0.0150,-15.00%) .
SCHWAB NET SLUMPS 80% ON YEAR-AGO GAIN
Discount broker 3Q net falls to $304 million, or 26c a share, due to gains from last year's $3.3 billion sale of U.S. Trust as its customers put $24 billion into their accounts during the period. Analysts were expecting 23c.
WAMU'S PARENT TO REGAIN CONTROL OF $4.4B CASH
The bankrupt parent of Washington Mutual Bank reaches a deal with JPMorgan Chase (JPM:$41.1300,$0.4200,1.03%) to regain control of nearly $4.4 billion in cash it had on deposit with the failed thrift when it was seized by regulators.
OIL DIPS AS DEMAND GROWTH DOUBTED
Crude futures fall briefly below $75 a barrel, caught up in mounting expectations of weaker demand. Nymex light, sweet November crude recently down $2.31 at $76.32 a barrel after dipping to $74.97, the lowest benchmark price since Sept. 5, 2007.
AMR NET DOWN 74%, TO BUY DREAMLINERS
Airline posts net income of $45 million, or 17c a share, as it announces an order to acquire up to 100 Boeing (BA:$44.2600,$-0.8100,-1.80%) 787 Dreamliners. Revenue rises 8% to $6.4 billion. Shares add 3%.
COCA-COLA NET UP 14% AS GLOBAL SALES RISE
Soft drink giant earns $1.89 billion, or 81c a share, in its 3Q as global volume rises 5% and sales grow in international developing markets. Shares rise 5% as revenue tops analysts' expectations
ECB EXPANDS COLLATERAL, LONG-TERM LIQUIDITY
The European Central Bank says it will expand the type of collateral it accepts in exchange for bank refinancing operations, including syndicated loans, in a raft of measures to restore balanced liquidity conditions.
CONGRESS GETS FED'S COMMERCIAL PAPER REPORTS
U.S. Senate Banking Committee says the Federal Reserve has submitted two reports on its new commercial paper facility and loan to American International Group (AIG:$2.59,00$-0.21,00-7.50%) , as required by the recent financial rescue legislation.
VP CHENEY SUFFERS ABNORMAL HEART RHYTHM
U.S. Vice President Dick Cheney cancels a planned political event and will see his doctors after experiencing a recurrence of an abnormal heart rhythm, his press secretary says.
ICELAND CUTS KEY INTEREST RATE TO 12%
Iceland's central bank cuts its key policy rate for the first time since 2003 in an unscheduled announcement as the country remains mired in economic crisis. The Central Bank of Iceland says it slashed its key rate to 12% from 15.5%.
EUROPEAN SHARES TUMBLE AS RECESSION FEARS GROW
Rehashed recession fears help break a two-day winning streak for European stocks, with the mining sector sagging on concerns of a tailoff in commodity demand. Investors are hit with a sobering realization that, while a global bank bailout may boost sentiment in the short term, the global economy is still in intensive care and will remain there for some time yet. London ends down 7.1%.
FANNIE, FREDDIE DEBT RISK PREMIUMS WIDEN
The risk premiums on debt securities issued by Fannie Mae (FNM:$1.03,00$-0.07,00-6.36%) and Freddie Mac (FRE:$1.1600,$-0.0900,-7.20%) are widening as investors react to the prospect of more government debt supply, and purchases of underperforming mortgage bonds by the two firms.
NYC COMPTROLLER SEES MORE JOB LOSSES
New York City's economy may suffer more private-sector job loss than previously expected in the near term, but Comptroller William Thompson says he's confident the city will be resilient in the long run.
FED'S ROSENGREN SAYS INFLATION RATE TOO HIGH
Federal Reserve Bank Of Boston President Eric Rosengren says the U.S. inflation rate is higher than the Fed would like it to be, but a sluggish economy could cool things off.
INTEL NET RISES 12%; OUTLOOK UNCERTAIN
Intel (INTC:$15.94,00$0.01,000.06%) posts a 12% jump in 3Q profit and points to continued sales growth in the current period, but cautions that the outlook for spending on technology products is uncertain. Shares rise 2% pre-market.
DELTA SWINGS TO LOSS ON HIGHER FUEL COSTS
Airline loses $50 million, or 13c a share, in 3Q as high fuel prices continue to eat away at results. Results include a net $24 million in charges; excluding them, the loss would have been 7c. Revenue rises 9% to $5.72 billion. CEI says carrier is ready to address slower 2009 global market. Shares fall 5%.
CREDIT SUISSE (CS:$42.6700,$-0.9100,-2.09%) /TREMONT HEDGE FUND INDEX DOWN
The Credit Suisse (CS:$42.6700,$-0.9100,-2.09%) /Tremont Hedge Fund Index falls 6.6% in September, much worse than August's 1.8% drop and putting the year-to-date decline at 13.9%. The decline shows that every sector fell for the month as the markets were battered.
CFTC CALLS FOR REFORM OF OTC DERIVATIVES
The acting chairman of the U.S. Commodity Futures Trading Commission calls on Congress to enact bold new reforms for derivatives products, including a request to grant the CFTC the authority to regulate them.
HURRICANE OMAR WINDS AT 85 MPH
Hurricane Omar was churns toward the Virgin Islands, gaining strength as authorities issued warnings across much of the northeastern Caribbean. The hurricane, with winds at 85 mph, is moving slowly northeast toward San Juan
======= DOW JONES NEWSWIRES ANALYSIS AND COMMENTARIES =======
SIMON SAYS
Shippers Washed Up, For Now
The dramatic selloff for shippers came as a shock even to the experts. Many shipping analysts were eagerly anticipating a rapid bump in maritime freight hauling activity following the end of the Beijing Olympic Games.
SOMETHING VENTURED Credit Woes Having Impact On VC Industry
The difficulty of securing debt, coupled with unhinged stock market stamping out public offerings, will mean many later-stage venture-backed companies will have to lean harder on venture capitalists and other private equity for capital.
============ U.S. MARKETS ACTION ===========
DJIA down 310.71 points to 9000.28
NASDAQ down 61.59 points to 1717.42
S&P 500 down 41.62 points to 956.39
10-year T-note 100 13/32 at 4.073 yield up .020
NYMEX Crude down $3.15 at $ 75.80/bbl
Euro/Dollar down 0.0084 at 1.3535
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-15-081300ET
Copyright (c) 2008 Dow Jones & Company, Inc.
News Highlights: Top Equities Stories Of The Day
10/15 01:00 PM
TOP STORIES
US STOCKS DOWN STEEPLY ON GLOBAL ECONOMY WORRIES
Stocks slide and the Dow Jones Industrial Average is down by more than 300 points, below 9,000, as lackluster corporate earnings and another big drop in oil prices feed into fears about the depth of a potential global recession.
BERNANKE SAYS USING ALL TOOLS TO STABILIZE MARKETS
Fed Chairman Ben Bernanke keeps the door open to further interest rate cuts, saying policymakers will keeping using "all the tools at our disposal" to restore stability in financial markets. He also says credit markets will take time to "unfreeze."
JPMORGAN NET PLUNGES 84% ON WRITE-DOWNS
Banking giant's 3Q net tumbles to $527 million, or 11c a share, amid $3.6 billion in write-downs and $640 million in losses from its acquisition of Washington Mutual (WAMUQ:$0.0980,$0.0004,0.41%) , but says profits triple at the investment banking unit. Shares down 1%.
US RETAIL SALES DIVE IN SEPTEMBER
U.S. retail sales take the sharpest drop in three years, diving by 1.2% last month, as consumers sharply cut spending on economic fears. The Labor Department says the producer price index fell 0.4% in September on lower energy prices.
WELLS FARGO (WFC:$34.6400,$1.1200,3.34%) 3Q EARNINGS BEAT EXPECTATIONS
Wells Fargo (WFC:$34.6400,$1.1200,3.34%) posts net of $1.6 billion, or 49c a share, down 23% from the prior year, but better than analysts' forecasts of 41c a share. Earnings are hurt by troubled investments in Fannie Mae (FNM:$1.03,00$-0.07,00-6.36%) , Freddie Mac (FRE:$1.1600,$-0.0900,-7.20%) and Lehman Brothers (LEHMQ:$0.0850,$-0.0150,-15.00%) .
SCHWAB NET SLUMPS 80% ON YEAR-AGO GAIN
Discount broker 3Q net falls to $304 million, or 26c a share, due to gains from last year's $3.3 billion sale of U.S. Trust as its customers put $24 billion into their accounts during the period. Analysts were expecting 23c.
WAMU'S PARENT TO REGAIN CONTROL OF $4.4B CASH
The bankrupt parent of Washington Mutual Bank reaches a deal with JPMorgan Chase (JPM:$41.1300,$0.4200,1.03%) to regain control of nearly $4.4 billion in cash it had on deposit with the failed thrift when it was seized by regulators.
OIL DIPS AS DEMAND GROWTH DOUBTED
Crude futures fall briefly below $75 a barrel, caught up in mounting expectations of weaker demand. Nymex light, sweet November crude recently down $2.31 at $76.32 a barrel after dipping to $74.97, the lowest benchmark price since Sept. 5, 2007.
AMR NET DOWN 74%, TO BUY DREAMLINERS
Airline posts net income of $45 million, or 17c a share, as it announces an order to acquire up to 100 Boeing (BA:$44.2600,$-0.8100,-1.80%) 787 Dreamliners. Revenue rises 8% to $6.4 billion. Shares add 3%.
COCA-COLA NET UP 14% AS GLOBAL SALES RISE
Soft drink giant earns $1.89 billion, or 81c a share, in its 3Q as global volume rises 5% and sales grow in international developing markets. Shares rise 5% as revenue tops analysts' expectations
ECB EXPANDS COLLATERAL, LONG-TERM LIQUIDITY
The European Central Bank says it will expand the type of collateral it accepts in exchange for bank refinancing operations, including syndicated loans, in a raft of measures to restore balanced liquidity conditions.
CONGRESS GETS FED'S COMMERCIAL PAPER REPORTS
U.S. Senate Banking Committee says the Federal Reserve has submitted two reports on its new commercial paper facility and loan to American International Group (AIG:$2.59,00$-0.21,00-7.50%) , as required by the recent financial rescue legislation.
VP CHENEY SUFFERS ABNORMAL HEART RHYTHM
U.S. Vice President Dick Cheney cancels a planned political event and will see his doctors after experiencing a recurrence of an abnormal heart rhythm, his press secretary says.
ICELAND CUTS KEY INTEREST RATE TO 12%
Iceland's central bank cuts its key policy rate for the first time since 2003 in an unscheduled announcement as the country remains mired in economic crisis. The Central Bank of Iceland says it slashed its key rate to 12% from 15.5%.
EUROPEAN SHARES TUMBLE AS RECESSION FEARS GROW
Rehashed recession fears help break a two-day winning streak for European stocks, with the mining sector sagging on concerns of a tailoff in commodity demand. Investors are hit with a sobering realization that, while a global bank bailout may boost sentiment in the short term, the global economy is still in intensive care and will remain there for some time yet. London ends down 7.1%.
FANNIE, FREDDIE DEBT RISK PREMIUMS WIDEN
The risk premiums on debt securities issued by Fannie Mae (FNM:$1.03,00$-0.07,00-6.36%) and Freddie Mac (FRE:$1.1600,$-0.0900,-7.20%) are widening as investors react to the prospect of more government debt supply, and purchases of underperforming mortgage bonds by the two firms.
NYC COMPTROLLER SEES MORE JOB LOSSES
New York City's economy may suffer more private-sector job loss than previously expected in the near term, but Comptroller William Thompson says he's confident the city will be resilient in the long run.
FED'S ROSENGREN SAYS INFLATION RATE TOO HIGH
Federal Reserve Bank Of Boston President Eric Rosengren says the U.S. inflation rate is higher than the Fed would like it to be, but a sluggish economy could cool things off.
INTEL NET RISES 12%; OUTLOOK UNCERTAIN
Intel (INTC:$15.94,00$0.01,000.06%) posts a 12% jump in 3Q profit and points to continued sales growth in the current period, but cautions that the outlook for spending on technology products is uncertain. Shares rise 2% pre-market.
DELTA SWINGS TO LOSS ON HIGHER FUEL COSTS
Airline loses $50 million, or 13c a share, in 3Q as high fuel prices continue to eat away at results. Results include a net $24 million in charges; excluding them, the loss would have been 7c. Revenue rises 9% to $5.72 billion. CEI says carrier is ready to address slower 2009 global market. Shares fall 5%.
CREDIT SUISSE (CS:$42.6700,$-0.9100,-2.09%) /TREMONT HEDGE FUND INDEX DOWN
The Credit Suisse (CS:$42.6700,$-0.9100,-2.09%) /Tremont Hedge Fund Index falls 6.6% in September, much worse than August's 1.8% drop and putting the year-to-date decline at 13.9%. The decline shows that every sector fell for the month as the markets were battered.
CFTC CALLS FOR REFORM OF OTC DERIVATIVES
The acting chairman of the U.S. Commodity Futures Trading Commission calls on Congress to enact bold new reforms for derivatives products, including a request to grant the CFTC the authority to regulate them.
HURRICANE OMAR WINDS AT 85 MPH
Hurricane Omar was churns toward the Virgin Islands, gaining strength as authorities issued warnings across much of the northeastern Caribbean. The hurricane, with winds at 85 mph, is moving slowly northeast toward San Juan
======= DOW JONES NEWSWIRES ANALYSIS AND COMMENTARIES =======
SIMON SAYS
Shippers Washed Up, For Now
The dramatic selloff for shippers came as a shock even to the experts. Many shipping analysts were eagerly anticipating a rapid bump in maritime freight hauling activity following the end of the Beijing Olympic Games.
SOMETHING VENTURED Credit Woes Having Impact On VC Industry
The difficulty of securing debt, coupled with unhinged stock market stamping out public offerings, will mean many later-stage venture-backed companies will have to lean harder on venture capitalists and other private equity for capital.
============ U.S. MARKETS ACTION ===========
DJIA down 310.71 points to 9000.28
NASDAQ down 61.59 points to 1717.42
S&P 500 down 41.62 points to 956.39
10-year T-note 100 13/32 at 4.073 yield up .020
NYMEX Crude down $3.15 at $ 75.80/bbl
Euro/Dollar down 0.0084 at 1.3535
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-15-081300ET
Copyright (c) 2008 Dow Jones & Company, Inc.
News Highlights: Top Equities Stories Of The Day
10/15 01:00 PM
TOP STORIES
US STOCKS DOWN STEEPLY ON GLOBAL ECONOMY WORRIES
Stocks slide and the Dow Jones Industrial Average is down by more than 300 points, below 9,000, as lackluster corporate earnings and another big drop in oil prices feed into fears about the depth of a potential global recession.
BERNANKE SAYS USING ALL TOOLS TO STABILIZE MARKETS
Fed Chairman Ben Bernanke keeps the door open to further interest rate cuts, saying policymakers will keeping using "all the tools at our disposal" to restore stability in financial markets. He also says credit markets will take time to "unfreeze."
JPMORGAN NET PLUNGES 84% ON WRITE-DOWNS
Banking giant's 3Q net tumbles to $527 million, or 11c a share, amid $3.6 billion in write-downs and $640 million in losses from its acquisition of Washington Mutual (WAMUQ:$0.0980,$0.0004,0.41%) , but says profits triple at the investment banking unit. Shares down 1%.
US RETAIL SALES DIVE IN SEPTEMBER
U.S. retail sales take the sharpest drop in three years, diving by 1.2% last month, as consumers sharply cut spending on economic fears. The Labor Department says the producer price index fell 0.4% in September on lower energy prices.
WELLS FARGO (WFC:$34.6400,$1.1200,3.34%) 3Q EARNINGS BEAT EXPECTATIONS
Wells Fargo (WFC:$34.6400,$1.1200,3.34%) posts net of $1.6 billion, or 49c a share, down 23% from the prior year, but better than analysts' forecasts of 41c a share. Earnings are hurt by troubled investments in Fannie Mae (FNM:$1.03,00$-0.07,00-6.36%) , Freddie Mac (FRE:$1.1600,$-0.0900,-7.20%) and Lehman Brothers (LEHMQ:$0.0850,$-0.0150,-15.00%) .
SCHWAB NET SLUMPS 80% ON YEAR-AGO GAIN
Discount broker 3Q net falls to $304 million, or 26c a share, due to gains from last year's $3.3 billion sale of U.S. Trust as its customers put $24 billion into their accounts during the period. Analysts were expecting 23c.
WAMU'S PARENT TO REGAIN CONTROL OF $4.4B CASH
The bankrupt parent of Washington Mutual Bank reaches a deal with JPMorgan Chase (JPM:$41.1300,$0.4200,1.03%) to regain control of nearly $4.4 billion in cash it had on deposit with the failed thrift when it was seized by regulators.
OIL DIPS AS DEMAND GROWTH DOUBTED
Crude futures fall briefly below $75 a barrel, caught up in mounting expectations of weaker demand. Nymex light, sweet November crude recently down $2.31 at $76.32 a barrel after dipping to $74.97, the lowest benchmark price since Sept. 5, 2007.
AMR NET DOWN 74%, TO BUY DREAMLINERS
Airline posts net income of $45 million, or 17c a share, as it announces an order to acquire up to 100 Boeing (BA:$44.2600,$-0.8100,-1.80%) 787 Dreamliners. Revenue rises 8% to $6.4 billion. Shares add 3%.
COCA-COLA NET UP 14% AS GLOBAL SALES RISE
Soft drink giant earns $1.89 billion, or 81c a share, in its 3Q as global volume rises 5% and sales grow in international developing markets. Shares rise 5% as revenue tops analysts' expectations
ECB EXPANDS COLLATERAL, LONG-TERM LIQUIDITY
The European Central Bank says it will expand the type of collateral it accepts in exchange for bank refinancing operations, including syndicated loans, in a raft of measures to restore balanced liquidity conditions.
CONGRESS GETS FED'S COMMERCIAL PAPER REPORTS
U.S. Senate Banking Committee says the Federal Reserve has submitted two reports on its new commercial paper facility and loan to American International Group (AIG:$2.59,00$-0.21,00-7.50%) , as required by the recent financial rescue legislation.
VP CHENEY SUFFERS ABNORMAL HEART RHYTHM
U.S. Vice President Dick Cheney cancels a planned political event and will see his doctors after experiencing a recurrence of an abnormal heart rhythm, his press secretary says.
ICELAND CUTS KEY INTEREST RATE TO 12%
Iceland's central bank cuts its key policy rate for the first time since 2003 in an unscheduled announcement as the country remains mired in economic crisis. The Central Bank of Iceland says it slashed its key rate to 12% from 15.5%.
EUROPEAN SHARES TUMBLE AS RECESSION FEARS GROW
Rehashed recession fears help break a two-day winning streak for European stocks, with the mining sector sagging on concerns of a tailoff in commodity demand. Investors are hit with a sobering realization that, while a global bank bailout may boost sentiment in the short term, the global economy is still in intensive care and will remain there for some time yet. London ends down 7.1%.
FANNIE, FREDDIE DEBT RISK PREMIUMS WIDEN
The risk premiums on debt securities issued by Fannie Mae (FNM:$1.03,00$-0.07,00-6.36%) and Freddie Mac (FRE:$1.1600,$-0.0900,-7.20%) are widening as investors react to the prospect of more government debt supply, and purchases of underperforming mortgage bonds by the two firms.
NYC COMPTROLLER SEES MORE JOB LOSSES
New York City's economy may suffer more private-sector job loss than previously expected in the near term, but Comptroller William Thompson says he's confident the city will be resilient in the long run.
FED'S ROSENGREN SAYS INFLATION RATE TOO HIGH
Federal Reserve Bank Of Boston President Eric Rosengren says the U.S. inflation rate is higher than the Fed would like it to be, but a sluggish economy could cool things off.
INTEL NET RISES 12%; OUTLOOK UNCERTAIN
Intel (INTC:$15.94,00$0.01,000.06%) posts a 12% jump in 3Q profit and points to continued sales growth in the current period, but cautions that the outlook for spending on technology products is uncertain. Shares rise 2% pre-market.
DELTA SWINGS TO LOSS ON HIGHER FUEL COSTS
Airline loses $50 million, or 13c a share, in 3Q as high fuel prices continue to eat away at results. Results include a net $24 million in charges; excluding them, the loss would have been 7c. Revenue rises 9% to $5.72 billion. CEI says carrier is ready to address slower 2009 global market. Shares fall 5%.
CREDIT SUISSE (CS:$42.6700,$-0.9100,-2.09%) /TREMONT HEDGE FUND INDEX DOWN
The Credit Suisse (CS:$42.6700,$-0.9100,-2.09%) /Tremont Hedge Fund Index falls 6.6% in September, much worse than August's 1.8% drop and putting the year-to-date decline at 13.9%. The decline shows that every sector fell for the month as the markets were battered.
CFTC CALLS FOR REFORM OF OTC DERIVATIVES
The acting chairman of the U.S. Commodity Futures Trading Commission calls on Congress to enact bold new reforms for derivatives products, including a request to grant the CFTC the authority to regulate them.
HURRICANE OMAR WINDS AT 85 MPH
Hurricane Omar was churns toward the Virgin Islands, gaining strength as authorities issued warnings across much of the northeastern Caribbean. The hurricane, with winds at 85 mph, is moving slowly northeast toward San Juan
======= DOW JONES NEWSWIRES ANALYSIS AND COMMENTARIES =======
SIMON SAYS
Shippers Washed Up, For Now
The dramatic selloff for shippers came as a shock even to the experts. Many shipping analysts were eagerly anticipating a rapid bump in maritime freight hauling activity following the end of the Beijing Olympic Games.
SOMETHING VENTURED Credit Woes Having Impact On VC Industry
The difficulty of securing debt, coupled with unhinged stock market stamping out public offerings, will mean many later-stage venture-backed companies will have to lean harder on venture capitalists and other private equity for capital.
============ U.S. MARKETS ACTION ===========
DJIA down 310.71 points to 9000.28
NASDAQ down 61.59 points to 1717.42
S&P 500 down 41.62 points to 956.39
10-year T-note 100 13/32 at 4.073 yield up .020
NYMEX Crude down $3.15 at $ 75.80/bbl
Euro/Dollar down 0.0084 at 1.3535
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-15-081300ET
Copyright (c) 2008 Dow Jones & Company, Inc.
Once again, they move the price down 3 cents 2 minutes after the bell, LOL...
Not saying I buy into the theory, but if there is an "economic war"(chess game?) going on right now, FRE/FNM are the King and Queen, IMO...
Standoff at 1.24
Nice to be green at least...
After Hours: $ 1.20 0.04 (+3.45%) Volume: 610.45 k 7:59 PM EDT Oct 10, 2008
After Hours: $ 1.08 0.00 (0.00%) Volume: 558.78 k 7:59 PM EDT Oct 10, 2008
Have a grate weekend, and enjoy the show!
UPDATE: FDIC OKs Deposit Insurance Hike, Mtge Account Rules
10/10 03:55 PM
(Updates with final approval, comments from FDIC lawyer and Fannie Mae executive)
By Sarah N. Lynch
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The Federal Deposit Insurance Corp. Friday granted final approval to a temporary increase in bank account deposit insurance and acted on a new proposal aimed at simplifying federal insurance coverage for mortgage servicing accounts.
The FDIC already raised its standard deposit insurance amount to $250,000 from $100,000 per account as part of the $700 billion bailout package that was signed into law by President George W. Bush on Oct. 3.
Friday's vote formalized the temporary increase, which will remain in effect until Dec. 31, 2009 in an effort to protect the public from potential increased losses arising from the financial crisis.
The mortgage account proposal is new. The FDIC hopes it will help better protect investors, mortgage servicers and borrowers from unexpected losses on mortgage servicing accounts if a bank fails. The interim rule also seeks to simplify these rules for determining insurance coverage of mortgage serving accounts.
Mortgage servicing accounts are bank accounts opened by a mortgage servicing company that collects monthly mortgage payments from borrowers. Those payments are deposited into the accounts before they are sent to the owner of the loan along with whatever interest the owner makes on the principal. The company that opens the account, meanwhile, gets to keep a cut for servicing the loan.
Under the proposal, insurance coverage for a mortgage serving account would be based on the borrowers' payments of principal and interest up to the newly increased temporary amount of $250,000 per borrower. That would mean, in effect, that insurance coverage would be provided for investors collectively, and the pay-outs would be based on the cumulative amount of principal and interest in the account.
"The FDIC's goals in this rulemaking are twofold," the FDIC proposed interim rule change reads. "First, the FDIC seeks to make the coverage rules for mortgage servicing accounts easy to understand and easy to apply."
"Second, the FDIC recognizes that, at any one time, billions of dollars in principal and interest funds may be on deposit at insured depository institutions, providing a significant source of liquidity for the institution and credit to the institution's community."
Currently, accounts containing principal and interest payments are insured based on the ownership interest of each investor or lender.
Mortgage securitization, or bundling multiple mortgages into securities that can be sold to investors, has made it difficult for anyone to determine the share that each individual investor has in a mortgage-backed security because the principal and interest from those payments are lumped together.
An account with a $500,000 deposit, for instance, may appear on face value to be eligible to receive only $250,000 worth of FDIC insurance if the bank were to fail. But if there are actually 20 or 30 different borrowers associated with the account, it may be fully insured by the FDIC.
"The concern is there would be a significant delay in determining who the investors are," said Joe DiNuzzo, an attorney for the FDIC. "So if a bank that should fail had a high balance, millions of dollars, for example, in a mortgage servicing account, we wouldn't be able to make, in certain cases, a deposit insurance determination quickly. We couldn't match the payments to each of the investors. This, we think, is a valid alternative."
Under the new rules, FDIC-insurance coverage of tax and insurance premium payments for borrowers would remain the same.
Following the approval of the new rules, Fannie Mae's Executive Vice President Tom Lund issued a statement praising the new rule.
"With the FDIC's announcement today, Fannie Mae will begin to allow institutions servicing our mortgage-backed securities to continue to hold the principal and interest payments from loans in our MBS in eligible depository institutions, thereby freeing additional liquidity for these institutions and the financial system," he said.
"Recently, Fannie Mae exercised its option to collect the principal and interest on its MBS from certain institutions on a daily basis and placed the payments in a trust account to safeguard the funds on behalf of the MBS holders. Given that the FDIC's new policy effectively safeguards these principal and interest payments, we believe collecting the payments daily and holding them in trust may no longer be necessary."
The interim rule will go into effect immediately, but the public would still be able to comment on the issue.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=pz0rU6jVsz%2FDfuqi3KLR1g%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-10-081555ET
Copyright (c) 2008 Dow Jones & Company, Inc.
I have always held the belief that when FRE/FNM move, the market will follow.BWTFDIK?
Statement by Tom Lund Executive Vice President - Single-Family Mortgage Business on FDIC Announcement
10/10 02:59 PM
WASHINGTON, Oct. 10 /PRNewswire-FirstCall/ -- With the FDIC's announcement today, Fannie Mae will begin to allow institutions servicing our mortgage-backed securities (MBS) to continue to hold the principal and interest payments from loans in our MBS in eligible depository institutions, thereby freeing additional liquidity for these institutions and the financial system. Recently, Fannie Mae exercised its option to collect the principal and interest on its MBS from certain institutions on a daily basis and place the payments in a trust account to safeguard the funds on behalf of the MBS holders. Given that the FDIC's new policy effectively safeguards these principal and interest payments, we believe collecting the payments daily and holding them in trust may no longer be necessary. We will begin working with our customers to effectuate this change, consistent with our trust agreements and servicing guide.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. In 2008, we mark our 70th year of service to America's housing market. Our job is to help those who house America.
SOURCE Fannie Mae
It's been grate.
Very soon the market will realize, that anybody that hasn't been shaken yet, wont get shaken.JMHO
too funny!
I think BigBaller should be their. I hope for everyones sake he doesn't wear tight pants or short shorts...
My Lady is going to the 'Dead Show for Obama' in PA, monday night. I have too much going on, but if you see her give her a hug for me, any of you going...
GREEN!
After Hours: $ 1.06 0.03 (+2.91%) Volume: 445.11 k 7:59 PM EDT Oct 9, 2008
After Hours: $ 1.01 0.00 (0.00%) Volume: 374.14 k 7:59 PM EDT Oct 9, 2008
DOW keeps getting worse. We can all say, we were there... yippee...
Freddie Mac Temporarily Suspends Foreclosures in Texas, Louisiana Disaster Areas Hit by Hurricane Ike
10/09 03:42 PM
MCLEAN, Va., Oct. 9 /PRNewswire/ -- Freddie Mac today announced it is ordering servicers to suspend all foreclosure sales on properties with Freddie Mac-owned mortgages in the federally declared disaster areas caused by Hurricane Ike in Texas and Louisiana. Freddie Mac is one of the nation's largest investors in residential mortgages.
"Freddie Mac is taking this step because the extensive damage Hurricane Ike caused has made it difficult for our servicers to get the information they need to make case-by-case decisions about forbearance or other workout options," said Ingrid Beckles, vice president of servicing and asset management at Freddie Mac.
The suspension will extend from October 8 to December 31, 2008 and include mortgages that were in default prior to Hurricane Ike.
Servicers will be required after the suspension ends to consider individual circumstances in determining whether additional foreclosure relief should be extended or whether to proceed with foreclosure.
Today's announcement only applies to properties with Freddie Mac-owned mortgages in Texas or Louisiana counties, municipalities or parishes that were declared federal disaster areas and where federal aid in the form of individual assistance is available.
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.
SOURCE Freddie Mac
Good idea if you are in for a few years, IMO...
2nd UPDATE: Financials Sold Off As Short-Selling Ban Lifted
10/09 02:44 PM
(Updates throughout with more short-selling information, Lehman Brothers settlement and recent stock prices.)
DOW JONES NEWSWIRES
Financial services companies slumped Thursday, leading stocks lower, as the Securities and Exchange Commission's ban on short-selling expired at midnight and as fears over the health of the credit markets continued to weigh on the financial sector.
Among the biggest decliners were XL Capital Ltd., which dropped 53% to $ 4.09; student lender SLM Corp., which sank 13% to $6.84; and Wachovia Corp., down 19% to $4.10. Insurer American International Group Inc. tumbled 19% to $2.57.
Prudential Financial Inc. dropped 20% to $34.66. The company's credit default swaps, an indicator of sentiment about the company's credit, widened by 50 basis points from Wednesday to 785 basis points, according to CMA DataVision, suggesting heightened concern. Still, the spreads have not reached distressed levels seen last week.
The Financial Select Sector SPDR Fund (XLF), an exchange traded fund of financial stocks, dropped 2.5% to $14.90.
The SEC's ban on short-selling had sought to protect as many as 950 stocks, most from the financial sector, from steep declines. Stocks have fallen sharply anyway, as worldwide equities markets saw a mass exodus of capital.
Some say that with the ban now lifted, many financial stocks are returning to valuations that reflect the general sentiment in the market.
But it has become difficult to borrow stocks in order to short them, said Steve Sachs, head of trading at Rydex Investments.
"From what we've heard talking to a lot of trading desks, we haven't heard of about a lot of new shorts....the loan market is pretty tight right now," Sachs said, pointing to some holders of long positions deciding not to lend stocks.
Last month, California Public Employees' Retirement System, or Calpers, said it temporarily halted lending out shares of four investment banks: Goldman Sachs Group Inc., (GS), Morgan Stanley, State Street Corp. (SST) and Wachovia to "help mitigate the current instability of the market and any potential adverse short-selling impact on these important financial institution." Other large institutions have also followed suit since.
Despite some difficulty borrowing stocks to short, Mark Fitzgibbon, the director of research at Sandler O'Neill & Partners LP, said the lifting of the short-selling ban might have indirectly affected bank stocks Thursday. While the ban was in place, investors stayed away from certain option trades that they feared could be interpreted by regulators as indirect short-selling. But with the ban gone, option trading shot up Thursday, resulting in the substantial decline of bank stocks.
Besides short sellers, there are other catalysts damping sentiment for the financial sector.
Comments from Treasury Secretary Henry Paulson suggesting that more banks could fail seemed to undercut any relief found in the coordinated move by the world's central banks to cut short-term lending rates in unison.
Furthermore, with the Treasury hinting at injecting more capital into the market, there is a fear of diluting value for existing shareholders, said Craig Peckham, equity trading strategist at Jefferies & Co.
The expected Friday settlement for buyers of about $400 billion of protection on Lehman Brothers debt worried some stock traders. They said uncertainty over the settlement - which could be one of the most expensive in the history of the credit default swap market - is casting a dark cloud over the potential holders of the debt, such as Morgan Stanley, down 13% to 14.64, and Goldman Sachs, down 5.9% to $106.38.
Among regional banks, the only one strongly in the black Thursday was National City Corp.. Thursday, The Wall Street Journal said the regional bank is in talks with a number of banks about a possible sale. The bank's stock rallied on the news, gaining 2.7% to $2.29.
Investors rapidly sold off their shares in other regional banks amid increasing worries. KeyCorp was recently down 21%, while Marshall & Ilsley Corp. fell 16%. Fifth Third Bancorp, Zions Bancorp and Regions Financial Corp. were also down.
-By Kejal Vyas, Dow Jones Newswires; 201-938-5460, kejal.vyas@dowjones.com
-By Donna Kardos, Dow Jones Newswires; 201-938-5963; donna.kardos@dowjones.com
(Geoffrey Rogow, Matthias Rieker and Rob Curran contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=VRD32MtgWpTbaoQgILdS%2Fg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-09-081444ET
Copyright (c) 2008 Dow Jones & Company, Inc.
2nd UPDATE: Financials Sold Off As Short-Selling Ban Lifted
10/09 02:44 PM
(Updates throughout with more short-selling information, Lehman Brothers settlement and recent stock prices.)
DOW JONES NEWSWIRES
Financial services companies slumped Thursday, leading stocks lower, as the Securities and Exchange Commission's ban on short-selling expired at midnight and as fears over the health of the credit markets continued to weigh on the financial sector.
Among the biggest decliners were XL Capital Ltd., which dropped 53% to $ 4.09; student lender SLM Corp., which sank 13% to $6.84; and Wachovia Corp., down 19% to $4.10. Insurer American International Group Inc. tumbled 19% to $2.57.
Prudential Financial Inc. dropped 20% to $34.66. The company's credit default swaps, an indicator of sentiment about the company's credit, widened by 50 basis points from Wednesday to 785 basis points, according to CMA DataVision, suggesting heightened concern. Still, the spreads have not reached distressed levels seen last week.
The Financial Select Sector SPDR Fund (XLF), an exchange traded fund of financial stocks, dropped 2.5% to $14.90.
The SEC's ban on short-selling had sought to protect as many as 950 stocks, most from the financial sector, from steep declines. Stocks have fallen sharply anyway, as worldwide equities markets saw a mass exodus of capital.
Some say that with the ban now lifted, many financial stocks are returning to valuations that reflect the general sentiment in the market.
But it has become difficult to borrow stocks in order to short them, said Steve Sachs, head of trading at Rydex Investments.
"From what we've heard talking to a lot of trading desks, we haven't heard of about a lot of new shorts....the loan market is pretty tight right now," Sachs said, pointing to some holders of long positions deciding not to lend stocks.
Last month, California Public Employees' Retirement System, or Calpers, said it temporarily halted lending out shares of four investment banks: Goldman Sachs Group Inc., (GS), Morgan Stanley, State Street Corp. (SST) and Wachovia to "help mitigate the current instability of the market and any potential adverse short-selling impact on these important financial institution." Other large institutions have also followed suit since.
Despite some difficulty borrowing stocks to short, Mark Fitzgibbon, the director of research at Sandler O'Neill & Partners LP, said the lifting of the short-selling ban might have indirectly affected bank stocks Thursday. While the ban was in place, investors stayed away from certain option trades that they feared could be interpreted by regulators as indirect short-selling. But with the ban gone, option trading shot up Thursday, resulting in the substantial decline of bank stocks.
Besides short sellers, there are other catalysts damping sentiment for the financial sector.
Comments from Treasury Secretary Henry Paulson suggesting that more banks could fail seemed to undercut any relief found in the coordinated move by the world's central banks to cut short-term lending rates in unison.
Furthermore, with the Treasury hinting at injecting more capital into the market, there is a fear of diluting value for existing shareholders, said Craig Peckham, equity trading strategist at Jefferies & Co.
The expected Friday settlement for buyers of about $400 billion of protection on Lehman Brothers debt worried some stock traders. They said uncertainty over the settlement - which could be one of the most expensive in the history of the credit default swap market - is casting a dark cloud over the potential holders of the debt, such as Morgan Stanley, down 13% to 14.64, and Goldman Sachs, down 5.9% to $106.38.
Among regional banks, the only one strongly in the black Thursday was National City Corp.. Thursday, The Wall Street Journal said the regional bank is in talks with a number of banks about a possible sale. The bank's stock rallied on the news, gaining 2.7% to $2.29.
Investors rapidly sold off their shares in other regional banks amid increasing worries. KeyCorp was recently down 21%, while Marshall & Ilsley Corp. fell 16%. Fifth Third Bancorp, Zions Bancorp and Regions Financial Corp. were also down.
-By Kejal Vyas, Dow Jones Newswires; 201-938-5460, kejal.vyas@dowjones.com
-By Donna Kardos, Dow Jones Newswires; 201-938-5963; donna.kardos@dowjones.com
(Geoffrey Rogow, Matthias Rieker and Rob Curran contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=VRD32MtgWpTbaoQgILdS%2Fg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-09-081444ET
Copyright (c) 2008 Dow Jones & Company, Inc.