Winners & Losers

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Financial Winners & Losers: PMI Group

Debra Borchardt

Buyers were jumping back into financial stocks after two straight days of losses Thursday and PMI Group (PMI Quote) was among the big gainers.

The mortgage insurer is selling its Australian subsidiary to the Aussie's largest insurance company QBE Insurance Group for roughly $920 million. The deal will allow PMI to strengthen its balance sheet and focus on its U.S. business. PMI has struggled due to high payouts as a result of defaulted mortgages and foreclosures and recently reported a second quarter loss. The stock has lost 89% of its value over the last 12 months, but was surging 49.5% on Thursday to $4.17.

The deal lifted similar companies even as the market digested more negative news. Ambac(ABK Quote) jumped 15.7% to $4.56 and MBIA(MBI Quote) was lifted 17.9% to $10.32. Radian(RDN Quote) benefited as well as it climbed 13.4% to $3.65.

The NYSE Financial Sector Index advanced 71.88 to 6,311.52.

JPMorgan Chase(JPM Quote) managed to overcome its bad news and gained 2.4% to $37.81. The investment bank announced that it had reached an agreement to settle investigations by New York State over auction rate securities. JPMorgan will purchase the investments at par that certain customers bought prior to the February collapse of the market.

Morgan Stanley(MS Quote) was also to overcome its own auction-rate settlement and negative analyst sentiment. The firm agreed to pay a penalty in addition to the $4.5 billion in auction rate securities it said it would buy back on Wednesday. A Fox-Pitt analyst also cut his earnings estimates for the investment bank, citing more writedowns on mortgages to come. He expects Morgan will write down some $1.2 billion for the third quarter. The stock jumped 49 cents to $40.64.

Another auction-rate securities offender, UBS(UBS Quote) was accused by the state of New Hampshire of defrauding the state's leading issuer of student loans. The state regulators allege UBS guided the lender to stay in the ARS market even as it was advising other clients to get out. UBS, though, rose 40 cents to $19.84.

Fighting back from Wednesday's decline, First Marblehead(FMD Quote) jumped 9.6% to $2.75. First Marblehead provides outsourcing services for education lenders and has been under pressure since it lost key partners.

On the flip side, Jefferies Group(JEF Quote) shares tumbled 1.9% to $18.73 after a Banc of America Securities analyst downgraded it to sell from neutral and cited the brokerage its least favorite in the broker and asset manager space. BofA also said that Jefferies puts shareholder interests behind clients and management.