Story Stocks
09:38 am Fed to Buy Short-Term FNM, FRE Debt
The Federal Reserve announced today that it will begin purchasing short-term debt obligations issued by Fannie Mae (FNM 0.49), Freddie Mac (FRE 0.33) and the Federal home loan banks.
The purchases will be made over the Federal Reserve's primary dealers. The purchase operations are planned over the next several weeks. When the Treasury bailed out Fannie and Freddie earlier this month, it also announced it would be purchasing mortgage-backed securities from Fannie and Freddie.
The Treasury bailout led to a drop in mortgage rates.
Fannie Mae 30-day debt for 30-year fixed year mortgages went from 6.0% on Sept. 4 to 5.25% on Sept. 15. The debt then went back on the rise with recent turmoil, hitting 5.69% yesterday. The latest developments will likely spur a drop in the interest rate on short-term Fannie debt, which should, in turn, prompt a drop in mortgage rates.
The Fed will also extend nonrecourse loans to depositories and banks to finance the purchase of high-quality asset-backed commercial paper from money market funds. The actions are meant to improve liquidity in money market funds.
09:29 am Citigroup (C)
Yesterday, it was reported that Washington Mutual (WM 2.99) was putting itself up for auction after seeing its stock price collapse due to exposure to the subprime housing market.
The Wall Street Journal reports this morning that Citigroup (C 16.65) is considering a bid for WaMu.
Citigroup has been one of the hardest hit firms during the recent downturn, writing off $55 billion and seeing its stock price fall 66%. During that time, however, it has raised $49 billion in capital, helping to limit its downturn and giving it some flexibility to make an acquisition.
WaMu, however, has seen its stock price collapse 92%, falling as low as $1.50, as traders bet the company would not make it.
Citi is up 31% in premarket trading and WaMu is up 53%, benefiting from the government's plan to takeover "toxic" assets and the temporary ban on short-selling of financial stocks.
08:51 am Oracle (ORCL)
Enterprise software maker Oracle (ORCL 18.75) posted strong fiscal first quarter sales growth while keeping costs under control, resulting in a solid increase in earnings that topped Wall Street's forecast. Shares are up 12% in premarket trading.
Oracle continues to dominate the database market with a 49% share. According to the company, its market share is more than the next four vendors combined.
Revenue rose 18% year-over-year to $5.42 billion, matching expectations. Software licenses and product support revenue climbed 23%. Services revenue rose 9%.
Oracle was able to limit operating expense growth below revenue growth, resulting in a 350 basis point expansion in non-GAAP operating margins to 40%, the company's highest ever.
The Redwood Shores, Calif.-based company saw non-GAAP earnings rise 32% year-over-year to $0.29 per share, or $1.5 billion. The results topped the average analyst estimate by two cents.
08:27 am SEC Halts Short-Selling of Financial Stocks
The SEC today announced a temporary and emergency action to halt the short-selling of financial stocks to "protect the integrity and quality of the securities market and strengthen investor confidence." The United Kingdom's regulatory body took similar actions yesterday.
The order follows extreme turmoil in the financial markets, with some believing the short-selling of financial institutions sparked a self-fulfilling prophecy, playing a role in the collapse and near collapse of several companies. As shorts drive the price of a stock down, it creates a decline in market confidence which can cause customers to pull funds out of the financial institution and counterparties to stop trading with the institution.
The SEC feels that recent short-selling has driven financial stocks prices unrelated to their true price.
The action covers 799 financial institutions, effective Sept. 19, 2008 and will end Oct. 2, 2008. The SEC may extend the plan longer, but will not extend it longer than 30 calendar days.
08:07 am U.S. Working on Bailout Plan
The U.S. government is working on the creation of a program to ease the financial market turmoil, sending stock market futures soaring.
The proposal includes the federal government buying troubled assets at a discount from financial institutions and placing them into a new government entity, according to reports. Fed Chairman Ben Bernanke and Treasury Secretary Paulson worked on the plan with bipartisan Congress leaders.
Exact details are not known, but it is expected that Congress will act quickly.
The government made a similar move in the late 1980s during the savings and loan crisis.
Another move taken by the Treasury includes the establishment of a temporary guaranty program for the U.S. money market fund industry. The Treasury will insure holdings of money market mutual funds that pay a fee to participate in the program. President Bush approved Paulson to make up to $50 billion available to guarantee payment.
The money market plan comes after money market funds, typically thought of as a cash equivalent, ran into liquidity problems, with some funds' net asset values falling below $1.
A late report that the government was working on a solution to the crisis sparked a 4% rally Thursday, and stock futures are indicating that the stock market will open with another 4% gain today.
AI
