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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.671682 |
| Euro to US Dollar | 1.514693 |
| Japanese Yen to US Dollar | 0.011450 |
| Canadian Dollar to US Dollar | 0.957121 |
Stocks tried to make a comeback this afternoon, but last-minute selling in financial and technology shares pulled the major averages lower.
The Dow Jones industrials, up 138 points at the open and down as many as 97 points early in the afternoon, finished down 45 points, or 0.4%, to 11,055. The Dow was briefly in the black a half-hour before the market's close.
The Standard & Poor's 500 Index finished down 11 points, or 0.9%, to 1,228, and the Nasdaq Composite Index dropped nearly 26 points, or 1.2%, to 2,213.
Financial stocks were weak, especially stocks such as Washington Mutual (WM, news, msgs) and Zions Bancorp (ZION, news, msgs), because of investor worries about their ability to survive the housing slump. At one point, regional banks were showing their biggest losses in a decade.
The late selling pushed mortgage companies Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) lower despite the federal government's plan to support the companies, which own or control nearly half the mortgages in the United States. Fannie Mae closed down 5.1% to $9.73; Freddie Mac was down 7.1% to $7.20.
Meanwhile, semiconductor stocks were weak today and dragged tech shares lower. The Philadelphia Semiconductor Index ($SOX.X) was off 0.8% to 343.
In addition, chip giant Intel (INTC, news, msgs) planned to report second-quarter earnings after Tuesday's close.
Such key stocks as Research In Motion (RIMM, news, msgs), Oracle (ORCL, news, msgs), Cisco Systems (CSCO, news, msgs) and Google (GOOG, news, msgs) were also lower.
You can't blame Fannie Mae and Freddie Mac for today's market decline -- at least not completely.
Blame IndyMac (IMB, news, msgs), the $32 billion savings bank that federal regulators seized Friday, the second-largest bank failure in U.S. history.
"The factors that affected IndyMac are not isolated," said Alan Gayle, a strategist with Ridgeworth Capital Management in Richmond, Va. As a result, shares of a host of regional banks were sinking today as investors worried about the health of their loan portfolios.
Among the hardest hit were Washington Mutual, down 34.8% to $3.23; Zions Bancorp, off 23% to $19.73; Corus Bankshares (CORS, news, msgs), off 4.6% to $3.34; and National City (NCC, news, msgs), down 14.7% to $3.77.
After the close, Washington Mutual issued a statement saying it significantly exceeds all regulatory "well-capitalized" minimums for depository institutions and has excess liquidity of more than $40 billion.
Earlier, National City had issued a similar statement. The company said it had experienced no unusual depositor or creditor activity and has more than $12 billion in excess short-term liquidity.
And regional banks were not alone either. The 15 worst performers among S&P 500 stocks were financial companies, including Lehman Bros. (LEH, news, msgs), down 14.1% to $12.40.
In addition, five of the six biggest laggards among the 30 Dow stocks were financials. Bank of America (BAC, news, msgs) was the laggard, down 7% to $20.15.
"It's a fragile time in the market," Art Cashin of UBS Financial Services told CNBC.
Nineteen of 30 Dow stocks were lower, along with 348 S&P 500 stocks and 71 stocks in the Nasdaq-100 Index ($NDX.X). The index fell 13 points, or 0.7%, to 1,798.
GM shares rise on possible restructuring
After the close, General Motors (GM, news, msgs) shares moved up nearly 1% to $9.46 after the company said CEO Rick Wagoner will announce the automaker's second restructuring package in six weeks on Tuesday.GM had closed down 5.4% to $9.38 in regular trading, second-worst among the Dow stocks.
The automaker is looking to cut costs and shore up investor confidence in the face of slumping sales.
GM has been under intensifying pressure to cut costs because of a rapid shift away from trucks and sport utility vehicles and a decline in overall sales.
In early June, Wagoner announced GM would close four North American truck plants employing about 100,000 workers and would try to sell its Hummer brand in a rushed response to higher gas prices.
But market sentiment has darkened on GM and the auto sector in the weeks since that announcement with most analysts no longer expecting a substantial recovery in industrywide U.S. auto sales in 2009.
Also on tap for Tuesday:
- Federal Reserve Chairman Ben Bernanke begins two days of testimony on the economy.
- The Labor Department issues its monthly Producer Price Index report.
- The government reports on retail sales for June.
| Monday | Change from closing peak | Date of peak | |
|---|---|---|---|
| Dow Jones Industrial Average | 11,055.19 | -21.95% | Oct. 9, 2007 |
| S&P 500 Index | 1,228.30 | -21.52% | Oct. 9, 2007 |
| S&P 100 Index | 561.84 | -23.01% | Oct. 9, 2007 |
| Nasdaq Composite Index | 2,212.87 | -22.60% | Oct. 31, 2007 |
| Nasdaq-100 Index | 1,798.03 | -19.69% | Oct. 31, 2007 |
| S&P Midcap 400 Index | 779.96 | -14.96% | Oct. 9, 2007 |
| Russell 2000 Index | 664.50 | -22.35% | July 13, 2007 |
| Dow Jones Utilities Average | 511.92 | -7.39% | Dec. 10, 2007 |
| Dow Jones Transportation Average | 4,728.49 | -13.92% | June 5, 2008 |
| Nikkei 225 Index (Japan) | 13,014.87 | -25.45% | Oct. 11, 2007 |
| FTSE 100 Index (Britain) | 5,300.40 | -21.25% | Oct. 12, 2007 |
| Dax Index (Germany) | 6,200.25 | -22.89% | Oct. 12, 2007 |
Oil up; Bush lifts ban on offshore drilling
The weakness in financials came as crude oil closed up 10 cents to $145.18 a barrel. President Bush announced today that he was lifting a ban on drilling in the outer continental shelf -- a ban put in place by his father, former President George H.W. Bush.The decision is meaningless until Congress reverses its own moratorium that limits oil exploration on the continental shelf. That moratorium has been renewed every year since 1971, The Wall Street Journal noted.
Energy shares were mostly higher, although it will take years to find, let alone develop, new deposits.
Chevron (CVX, news, msgs) rose 0.6% to $92.80. Devon Energy (DVN, news, msgs) added 0.7% to $111.11. Schlumberger (SLB, news, msgs) jumped 2.7% to $101.79. Transocean (RIG, news, msgs) added 1.8% to $147.56.
Continental Airlines (CAL, news, msgs) fell 7.4% to $6.74, and American Airlines parent AMR Corp. (AMR, news, msgs) was off 5.9% to $4.47. But Southwest Airlines (LUV, news, msgs) jumped 3.2% o $13.62 and was the best performer among the 20 stocks in the Dow Jones Transportation Average ($DJT).
| Mon. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $145.18 | $145.08 | $0.10 | 3.70% | 51.26% |
| Heating oil (per gallon) | $4.0649 | $4.0766 | -$0.0117 | 4.15% | 53.43% |
| Natural gas (per million BTU) | $11.9590 | $11.9040 | $0.0550 | -10.44% | 59.82% |
| Unleaded gasoline (per gallon) | $3.5577 | $3.5632 | -$0.0055 | 1.61% | 42.83% |
Avastin sales cheers Genentech investors
After today's close, biotech company Genentech (DNA, news, msgs) reported higher-than-expected quarterly sales of its most important product, the cancer drug Avastin, and raised its earnings outlook for the year.The company's profit rose 4.7% in the second quarter but fell short of Wall Street expectations due to higher costs.
Stock Chart (Year)
Genentech
Genentech earned $782 million, or 73 cents a share, up from $747 million, or 70 cents per share, a year ago.
Genentech expects full-year earnings of $3.40 to $3.50 a share, excluding one-time items, up from a prior forecast of $3.35 to $3.45.
Revenue for the quarter rose 8% to $3.24 billion, a touch better than Wall Street's expectations.
Fannie and Freddie bounce off their lows
If there was good news from the market, it was that Fannie Mae and Freddie Mac came back from their lows of the day. Fannie Mae fell as much as 8.7% in the early afternoon before trimming its losses. Freddie Mac had been down as much as 21%.Shares of both companies fell more than 45% last week as investors worried one or both couldn't survive the housing slump.
Treasury Secretary Hank Paulson said over the weekend that the Bush administration would seek authorization from Congress to buy stock in the companies, as well as to boost its line of credit to the government-sponsored enterprises.
Separately, the Federal Reserve voted Sunday to allow Fannie and Freddie to borrow directly from the central bank.
The Fed today also voted to ban risky mortgage practices "to better protect consumers and facilitate responsible lending."
The new rule "prohibits unfair, abusive or deceptive home mortgage lending practices and restricts certain other mortgage practices," the Fed said in a news release.
Shares of Fannie and Freddie have lost about three-quarters of their values this year amid fears that the mortgage mess might overwhelm their capital resources.
Confidence badly needed
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies," Paulson's statement said. "Their support for the housing market is particularly important as we work through the current housing correction."Reaction to the plan was mixed.
"Ultimately, we do not view these measures, dramatic as they look, as either a turning point for the U.S. housing market or as a sign that the downturn will be much worse than previously believed," Goldman Sachs economist Jan Hatzius wrote in a note to clients Sunday. The moves "simply reaffirm our long-held -- and widely shared -- view that the government will do everything it can to avert a meltdown."
"Fannie Mae and Freddie Mac provide an enormous amount of liquidity to the mortgage market," Mark Vitner, a senior economist at Wachovia, wrote in a note to clients today. "Without them, mortgage rates would be significantly higher. The bailout is for the housing market and the broader U.S. economy."
Both Fannie and Freddie reiterated on Sunday that they have adequate capital positions and liquidity.
Stock charts (year)
Fannie Mae
Freddie Mac
Fannie and Freddie together own or guarantee more than $5 trillion in U.S. home mortgages, nearly half of the entire industry. Any further faltering by the companies could be disastrous for the already weak housing market.
Freddie Mac sold $3 billion in short-term debt today, a regularly scheduled sale auction that some had been worried about.
The debt sale "came in pretty well," Andrew Brenner, a co-chief of structured products and emerging markets at MF Global, told Bloomberg News. The bid-to-cover ratio -- a measure of demand that compares total bids with the amount of securities offered -- was more than 50% above the average of the past three months, according to Stone & McCarthy Research Associates.
Freddie and Fannie sell debt to raise capital to be able to buy mortgage securities.
SEC to probe rumormongers
Rumors about Fannie Mae's and Freddie Mac's solvency sent their share prices spiraling downward last week. A number of other financial-services companies, including Lehman Bros. and Bear Stearns, have had to deal with similar rumor-driven pressures; Bear was forced into a fire sale to JPMorgan Chase (JPM, news, msgs) as a result. Now the Securities and Exchange Commission has decided to act.The SEC says it will crack down on companies and individuals spreading false rumors. The agency will join with the Financial Industry Regulatory Authority and the New York Stock Exchange's regulatory division to conduct inquiries "aimed at ensuring that investors continue to get reliable, accurate information about public companies," SEC Chairman Christopher Cox said in a statement Sunday.
The move "may be the most effective step they could take" to curtail malicious rumors, James Cox, a securities law professor at Duke University, told Bloomberg News. Cox suggested that the move may not be enough to combat the promotion of rumors by hedge fund managers, who would not be subject to the inquiries.
More on IndyMac's seizure
IndyMac was the latest victim of the mortgage-market meltdown this weekend.The Federal Deposit Insurance Corp. late Friday took control of the thrift bank, which focuses on deposits and originating home mortgages.
More from MSN Money
Reich insinuated that a June 26 letter from Sen. Charles Schumer, D-New York, had sped up IndyMac's downfall. In the letter, which was made public, Schumer expressed concern about the company's financial health.
The FDIC insures deposits of up to $100,000 per depositor per bank. Retirement accounts are insured up to $250,000. But the seizure of IndyMac will cost the FDIC between $4 billion and $8 billion.
"It's a scary place to put your money with some of these institutions that are offering high rates to attract deposits. There will be some people who will learn a lesson," James Abbott, a banking analyst at Friedman, Billings, Ramsey, told The Wall Street Journal.
This Bud's for you, InBev
The King of Beers now has a new master.Anheuser-Busch (BUD, news, msgs) on Sunday agreed to a sweetened $52 billion offer from Belgian brewing giant InBev, creating the world's biggest beer maker.
InBev, which makes Stella Artois and Beck's, will pay $70 per share for the U.S. brewer -- a $5-per-share increase from its original bid, made on June 26. The new company will be called Anheuser-Busch-InBev.
Shares of Anheuser-Busch rose 0.6% to $66.87 on the day. InBev shares were down 3.4% to 43 euros in trading in Brussels; the stock is down 35% since last October.
Not everyone was thrilled about the deal, however. InBev "(leaches) out every dollar," Tom Pirco, president of consulting company Bevmark, told MarketWatch. "They will make Anheuser-Busch perform the way global companies do. That means no more goody-two-shoes attitude toward workers and distributors. Everyone is going to have cuts and bruises over this."
A merger will also mean the end to the nearly 150 years the Busch family has run the company.
Bidding war for Republic Services
Waste Management (WMI, news, msgs) entered the market for Republic Services (RSG, news, msgs) this morning.Waste Management offered $6.19 billion in cash and stock for Republic Services, which agreed in June to acquire Allied Waste (AW, news, msgs) in a $6.07 billion deal.
Waste Management said its $34-per-share bid offers "better and more certain value alternative to Republic stockholders than the recently announced Republic-Allied Waste transaction."
Shares of Republic Services jumped 13.8% to $31.76 on the news; Waste Management shares fell 5.8% to $34.49. Allied Waste shares fell 1.7% to $11.79.
Yahoo rejects Microsoft, Icahn deal
Yahoo (YHOO, news, msgs) on Saturday rejected yet another proposal from Microsoft (MSFT, news, msgs) and billionaire investor Carl Icahn.In a statement this weekend, Yahoo said that while the offer was better than the previous one, it still was not good enough to accept. Under the new proposal, Microsoft would buy Yahoo's search business, with the rest of the company going to Icahn. (Microsoft is the publisher of MSN Money.)
"It is ludicrous to think that our board would accept such a proposal," Yahoo Chairman Roy Bostock said.
The pressure is on for Yahoo Chief Executive Officer Jerry Yang, whose fate could be determined at the company's board meeting Aug. 1. Icahn is seeking to replace Yahoo's board at the meeting. Yang will have to explain to shareholders why the company continues to reject offers that would boost the share price.
The battle for Yahoo began Feb. 1, when Microsoft offered $31 per share for Yahoo. The two companies have since been in a tug of war, with Yahoo rejecting the offer, and then Microsoft walking away from a sweetened bid in May.
Shares of Yahoo had fallen 4.2% to $ 22.57 on the day; Microsoft shares were off 0.4% to $25.15.
| Mon. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.425% | 1.570% | -0.145 | -16.42% | -54.62% |
| 5-year Treasury note yield | 3.184% | 3.275% | -0.091 | -4.70% | -7.84% |
| 10-year Treasury note yield | 3.880% | 3.940% | -0.060 | -2.49% | -3.84% |
| 30-year Treasury bond yield | 4.469% | 4.517% | -0.048 | -1.37% | 0.22% |
| Currencies | |||||
| U.S. Dollar Index | 72.170 | 72.345 | -0.175 | -0.87% | -5.90% |
| British pound in dollars | $1.9944 | $1.9920 | 0.0024 | 0.06% | 0.26% |
| Dollar in British pounds | £0.5014 | £0.5020 | -0.0006 | -0.06% | -0.26% |
| Euro in dollars | $1.5913 | $1.5974 | -0.0061 | 1.03% | 8.88% |
| Dollar in euros | € 0.6284 | € 0.6260 | 0.0024 | -1.02% | -8.16% |
| Dollar in yen | 106.15 | 106.11 | 0.04 | -0.04% | -5.10% |
| Canadian dollar in U.S. dollars | $0.995 | $0.993 | $0.0013 | 1.51% | 0.18% |
| U.S. dollar in Canadian dollars | $1.006 | $1.007 | -$0.0006 | -1.47% | -0.17% |
| Commodities | |||||
| Gold | $973.70 | $960.60 | $13.10 | 4.89% | 16.19% |
| Copper | $3.7520 | $3.7400 | $0.01 | -3.36% | 23.38% |
| Silver | $19.2500 | $18.8200 | $0.43 | 9.94% | 29.02% |
| Corn | $6.6375 | $6.9100 | -$0.27 | -8.42% | 45.72% |
| Crude oil (NYMEX) (per barrel) | $145.18 | $145.08 | $0.10 | 3.70% | 51.26% |
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