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| Market Summary |
Stocks tumbled on Monday as the financial sector weighed heavily on the market. The Dow Jones Industrial Average sank over 200 points to close at 11,386.25. Broader stock indicators followed the same path. The Standard & Poor's 500 index declined 25.36 to 1,266.84 and the Nasdaq composite index fell 49.12 to 2,365.59. The financial sector was hit hard after a Credit Suisse analyst cut his price target for American International Group Inc (AIG: Charts, News, Offers). Fitch ratings also suggested that it might cut its ratings on the largest insurer. JPMorgan’s (JPM: Charts, News, Offers) announcement that it had lost $600 million during the current quarter on investments in Fannie (FNM: Charts, News, Offers) and Freddie (FRE: Charts, News, Offers) also contributed to the Dow’s descent. Fluctuating oil prices didn’t help the market either. Oil prices seesawed before falling 17 cents to $114.43 a barrel on the New York Mercantile Exchange. In corporate news, Broadcom (BRCM: Charts, News, Offers) agreed to buy the Advanced Micro Devices' (AMD: Charts, News, Offers) digital TV business for $192.8 million. Union officials rejected Boeing Co’s (BA: Charts, News, Offers) proposal that would have given union members a pay raise of 2.5% the first year and 2% in each of the following two years. Shares of Ford Motor Co. (F: Charts, News, Offers) touched their lowest price in more than 22 years as investors remained concerned about the struggling company. Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.78% from 3.86%. The dollar declined versus the euro and the yen.
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| Market News |
Ailing mortgage finance company Freddie Mac easily sold $2 billion of short-term debt on Monday, reassuring investors that it and rival Fannie Mae can fund operations without a government takeover. Fannie Mae (FNM: Charts, News, Offers) shares rose 9 percent, and Freddie Mac (FRE: Charts, News, Offers) stock gained more than 22 percent in early afternoon trading in New York. Broader markets tumbled. An analyst said the government-sponsored enterprises (GSEs), which own or guarantee nearly half of the mortgages in the United States, were unlikely to be nationalized, which also soothed market jitters. Investors have been dumping their stock and have pushed the shares down more than 90 percent since March on fears the housing slump will leave the two insolvent without emergency support from the government. (Source: Yahoo! Finance) Full Story
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A top regulator on Monday voiced concern about state-run Korea Development Bank's (KDB) interest in buying a global bank such as Lehman Brothers Holdings Inc (LEH: Charts, News, Offers), saying KDB should be just a "cheerleader" and let local private banks take the lead in any such purchase. The comments threw more cold water on investor hopes that KDB could soon invest in Lehman, and sent the U.S. investment bank's shares down as much as 8 percent. KDB said on Friday it was open to the acquisition of an overseas financial institution, naming Lehman as one of its options. The comments lifted Lehman shares 5 percent on Friday, giving hope to investors about the investment bank's prospects for raising capital, a day after a press report said KDB and another Asian financial institution had walked away from a deal. (Source: Forbes.com) Full Story
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Sales of existing homes rose in July, surpassing expectations, as buyers snapped up deeply discounted properties in parts of the U.S. hit hardest by the housing bust. However, the number of unsold properties hit an all-time high, the latest indication that the worst housing slump in decades is far from over. Prices nationwide are not expected to hit bottom until early next year. The National Association of Realtors reported Monday that sales rose 3.1 percent to a seasonally adjusted annual rate of 5 million units, down from June's downwardly revised rate of 4.85 million units. Sales had been expected to rise by only 1.6 percent, according to economists surveyed by Thomson/IFR. (Source: MSNBC) Full Story
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| Market Analysis |
Once a year at the end of August, the notable and quotable from the worlds of business, finance, academia and government trek to, if not up, Wyoming's Teton mountain range to attend the Federal Reserve Bank of Kansas City's Jackson Hole Conference. Whether it's the elevation that goes to their heads or an elevated sense of importance they get from rubbing shoulders with central bankers in shorts, the attendees treat the event like the annual pilgrimage to Mecca. The Kansas City Fed adds to the cachet by shrouding the event in secrecy. The agenda isn't posted on the Web site; registered guests and media covering the event have access to a password-protected site. The papers presented at last week's conference won't be accessible until sometime this week, according to the Kansas City Fed's public affairs office. (Academics could perish by the time the Kansas City Fed publishes.) (Source: Bloomberg) Full Story
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The willingness and ability of Americans to come back into the housing market over the next few months will determine whether the U.S. economy experiences a mild downturn or the deepest recession in 30 years. Many economists say that home prices have another 10 percent to fall to bring them into balance with rents and incomes. A fall of that magnitude would elicit a huge sigh of relief from Wall Street and Washington. But it wouldn't take much -- a further clampdown by private lenders or a meltdown at mortgage finance companies Fannie Mae (FNM: Charts, News, Offers) and Freddie Mac (FRE: Charts, News, Offers) -- to push home prices down much more severely, perhaps more than 20 percent. (Source: Reuters) Full Story
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The statistics are grim: Inflation is at a 17-year high. Unemployment is rising. Foreclosures are spreading. For many Americans, however, these figures are simply numbers. They are still gainfully employed and paying their mortgages. Sure, they are shelling out more for gas and groceries, which might prompt them to skip a movie or a dinner out. But overall, they are still better off than they were when America's last recession ended in November 2001. For others, of course, the picture looks much different. They are the statistics. These are the people who have lost their jobs and are struggling to hold onto their homes. Soaring prices at the pump and the supermarket have shattered any hope they can crawl out from under their debt. There's no question they are worse off than they were seven years ago. (Source: CNN Money) Full Story
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