The stock market had a solid open on Monday morning after the Treasury and the Federal Reserve announced Sunday they would aid Fannie Mae (FNM) and Freddie Mac (FRE) through a three-part government plan for immediate action. This led to initial strength in the shares of the mortgage giants, financial sector and the broader market. However, hopes for a corrective bounce soon dissipated as the popular averages started to pull back from their opening highs. The financial sector particularly, came under selling pressure.
Meanwhile, the regional banks started to dip. This fact accentuated further fears among investors of the ongoing viability issues facing the banking system. The indices started from that point pushing steadily lower until reaching red territory.
Judging from the way the market is currently behaving, it seem the biggest challenge investors currently face ; is their own state of mind. Their pessimism toward buying equities, even though the market is substantially oversold and problematic dynamics are only concentrated within the financial sector, is helping the bearish atmosphere gain predominance in the exchanging floors on systematic basis.
The Dow, Nasdaq and S&P 500 continued lower at midsession on fears there may be more bank failures. John Bovenzi, Chief operating officer of the Federal Deposit Insurance Corp, according to newsdaily stated: “I don’t expect there will be large bank failures. There will be small bank failures”. Mr. Bovenzi also stated that he would like to sell IndyMac Bancorp Inc as a whole to one healthy bank. On Friday, U.S. regulators seized IndyMac Bancorp (IMB) after withdrawals by panicked depositors led to the third-largest banking failure in U.S. history.
In the final hour of the trading session, stocks experienced a quick increase in buying interest, sending the INDU briefly into positive territory. However, the sell-off pattern prevailed again with the major average closing negatively.
In other news
– National City Corp. (NCC) shares plunged Monday amid rumors about the health of the nation’s regional banks. The bank, responded by saying it has experienced no unusual depositor or creditor activity and has more than $12 billion in excess short-term liquidity.
– After rumors of a possible bank run at Washington Mutual (WM), the co. in after-market hours said : WaMu significantly exceeds all regulatory “well-capitalized” minimums for depository institutions and has current excess liquidity of more than $40 billion.
– In merger and acquisition news, Anheuser – Busch (BUD) announced the acceptance of acquisition offer from InBev, after the Belgian company sweetened its offer to $70 per share, or $52 billion, from $65 per share. The $70 per/share purchase will give, Belgium-based InBev the biggest share in China, the U.S., Russia, Brazil and Germany, making it the world’s largest brewer.
– Waste Management (WMI) offered to acquire Republic Services (RSG) for $34 per share in cash, or roughly $6.2 billion, a 22% premium over RSG’s closing price on Friday.
– Apple (AAPL) shares got a boost during today’s trading, finishing up by $1.48 to $174.06. Chief Executive Steve Jobs said the new iPhone was “clearly off to a great start,” as it took Apple 74 days to sell 1 million of the first version of the iPhone.