South Africa Cuts Interest Rates; BlackRock Cans 500; Empire Co. Posts 13% Profit; KB Toys Files for Bankruptcy; Citi and UBS to Buy Back $30 Billion in Securities; Bank of America to Cut 35,000 Jobs
There is no way to sugar coat it or paint a rosy picture. This week could be disastrous for the market. Coming off eight straight down trading days, and the largest weekly percentage drop in the history of the Dow, the economic calendar provides no relief.
Yesterday, the wind come out of Wall Street’s sails.
After gaining nearly 670 points in little over a week, the Dow slumped more than 280 points. Financial stocks made up five of the six biggest decliners. Citigroup (C) dropped nearly 10 percent. American International Group (AIG), Bank of America (BAC), American Express (AXP) and JPMorgan Chase (JPM) all fell more than 6 percent.
This comes as little surprise to Taipan Daily editor Justice Litle. He says the latest rally in financial had no substance – except another shorting opportunity when the time is right. Wachovia (WB) is a case in point, says Justice…
Are we seeing a bottom to the bear market?
US stocks are heading for weekly gains. This despite big quarterly losses results from financials Citigroup (C) and Merrill Lynch (MER) and missed estimates from tech giants Google (GOOG) and Microsoft (MSFT).
Think of it this way, says Penny Sleuth editor Wayne Mulligan: “If you want to know whether or not we’ve reached a bottom, then all you need to do is think about the consumer.”
It has all the hallmarks of a political thriller: Washington lobbyists, political pressure and money… lots of money
Were, as The New York Times reports today, Fannie Mae (FNM) and Freddie Mac (FRE), which guarantee about $6 trillion dollars in US home loans, unduly “insulated” by Capitol Hill?
Did Congress make it implicit to the companies that any losses would be guarenteed with taxpayers’ hard-won cash?
Brian Hunt says the collapse of the US banking sector will one day lead so some fantastic bargains. He also says investors should avoid it like the plague for now…
The world’s largest credit-rating companies say mortgage lenders Fannie Mae (FNM) and Freddie Mac (FRE) have bullet-proof Aaa credit ratings. But Bloomberg says derivatives traders are treating the discount mortgage brokers as if they are rated five levels lower.
And, ominously, the price of contracts used to speculate on the creditworthiness of Fannie Mae and Freddie Mac and to protect against a default doubled in the past two months.
What about the government’s implied guarantee of the debt held by the companies? It seems investor confidence in short supply.
Editor’s Note: How do you protect yourself against a bear market? Should you put your money in stocks and bonds? What about real estate? Or commodities? Bill Bonner looks at the pros and cons.
More bad news from the US housing market: in the worst housing slump since the Great Depression, 67,967 homeowners with mortgage insurance fell at least 60 days behind on their loans, compared with 40,687 who got back on track.
Meanwhile, US financials continued their three-day slump on fears banks and bond insurers are running out of cash.
Editor’s Note: Like a farmer fertilizing his crops, the financial sector is spreading its muck far and wide, says Karim Rahemtulla in The Smart Profits Report. But is it the beginning of the end of the sector’s collapse? Karim reckons he knows how to predict the rebound…
Citigroup Inc. (C) — still reeling from the subprime fallout — was the target of another downgrade. Goldman Sachs (GS) analyst William Tanona said the bank may suffer $8.9 billion of second-quarter writedowns and be forced to cut its dividend again.
Tanona downgraded US banks to “neutral” from “attractive” and added Citigroup to Goldman’s “Americas conviction sell” list, Reuters reported.