Financials dip as FBI raids add to Ireland jitters
1:21p ET November 22, 2010 (MarketWatch)
NEW YORK (MarketWatch) -- U.S. financial stocks added to earlier losses on Monday afternoon, mirroring a broader market selloff but exacerbated by details developing around a large insider-trading inquiry.
The financial sector's losses outpaced broader losses on Wall Street tied to concerns about debt issues in Europe. While investors were relieved that there appears to be a final resolution to Ireland getting a bailout, they remain fearful that the weak banking system there could mean losses ahead on sector investments.
The Financial Select Sector ETF fell 1.9%, while the NYSE ARCA Broker/Dealer Index shed a bit more than 1.5%.
Goldman Sachs Group and Morgan Stanley were among the biggest decliners in the S&P 500 , shedding 4% and 1.4% respectively.
Ireland's decision to seek an international aid package to shore up its troubled banking sector brought only limited relief to financial markets on Monday, as investors continued to fret over Dublin's ability to avoid a restructuring and the potential for trouble elsewhere in the euro zone.
The move initially provided some relief across euro-zone credit markets, boosted the euro and lifted overall risk appetite, strategists said.
But sentiment soon soured, with the euro losing altitude after Moody's Investors Service said an expected shift of bank debt to the government balance sheet would likely result in a "multi-notch" downgrade to Ireland's Aa2 credit rating, which is currently under review. Read MarketWatch coverage of Irish relief plan.
In the U.S., financial-sector investors, already burned by accounting and other regulatory issues in recent years, are closely eyeing a federal probe into possible large-scale insider trading in involving the dealmaking side of the business.
The Federal Bureau of Investigation raided two hedge funds as part of the probe, The Wall Street Journal reported Monday. Read MarketWatcgh story on the FBI raids
Search warrants were issued for Diamondback Capital Management and Level Global Investors, the newspaper added.
The Wall Street Journal reported Monday on some of the tactics the FBI is using to gain cooperation from people in the industry.
'Courts of bankruptcy are essentially courts of equity, and their proceedings inherently are proceedings in equity.'
