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Monday's Financial Winners & Losers

Financial stocks were mostly drifting higher in step with the rest of the market on Monday, even as December new-home sales took a sizable slide.

The decline -- 4.7% from the prior month and nearly 41% year over year -- is but the latest disappointment following the bursting of the housing bubble some time ago, which led directly into the subprime muck that has blotted the financial sector so thoroughly in the past few months.

Still, the NYSE Financial Sector Index fought against today's initial downward momentum to shimmy up 195.89 points, or 2.6%, at 7,838.23, in recent trading. The KBW Bank Index also was up substantially.

Citigroup (C) lent support to both indices, recently adding 2.5% to $27.31, after several published reports indicated that it's filing with Chinese regulators to establish an investment-banking joint venture with Central China Securities Holdings.

Also riding higher was Nymex Holdings (NMX) after it and CME Group (CME), a fellow commodities exchange, confirmed that they're in "preliminary" merger discussions with an exclusive 30-day negotiating period. Current numbers being kicked around would have CME paying $36 in cash and 0.1323 of its shares for each Nymex share -- in total, about $119.22 per Nymex share, based on CME's Friday closing price.

As of Nymex's last reported share count in November, that would mean a deal worth roughly $11.07 billion. Another component to the agreement, if and when it closes, may have Nymex buying back its 816 memberships for up to $500 million.

New York-based Nymex was rising $8.26, or 7.7%, to $115.42 as Chicago's CME shed 1.8% to $617.85.

Elsewhere, First Horizon National (FHN) climbed 9.2% to $21.36 on word the Memphis, Tenn., bank will halt lending to national homebuilders and commercial real estate businesses while remaining in the construction-lending industry in its home state and elsewhere in the Southeast. That will hasten the company's intended $2 billion reduction in its national real estate portfolio this year, First Horizon said.

South Carolina-based South Financial (TSFG) chugged 9% higher on a Keefe Bruyette upgrade to market perform from underperform, and Dime Community Bancshares (DCOM), based in Brooklyn, garnered a buy rating at FTN Midwest. Shares of the latter leapt 5.5%.

And Sallie Mae (SLM) tacked on 2% to $20.27 after the Virginia-based student lender said it has dropped its lawsuit against a J.C.-Flowers led consortium whose $25 billion bid for Sallie was finally declared dead last month.

In connection with the lawsuit drop, two others in the original buyer group, Bank of America (BAC) and JPMorgan Chase (JPM), have agreed to lend it $31 billion for up to a year along with foreign banks Barclays (BCS), Deutsche Bank (DB), Credit Suisse (CS), Royal Bank of Scotland (RBS), and UBS (UBS).

The new borrowed sum replaces $30 billion in financing that BofA and JPMorgan had extended to Sallie in the interim as part of the doomed merger contract. The deal was soured a few months ago by a new federal law cutting subsidies to education lenders -- which, the J.C. Flowers consortium had argued, constituted a "material adverse effect," per the agreement.

On the losing side, mortgage lender Countrywide (CFC) spent most of the day lower, even though Countrywide CEO Angelo Mozilo "voluntarily" forfeited his $37.5 million severance package and other rights in connection with Countrywide's BofA merger agreement announced earlier this month. Shares of the Calabasas, Calif., company were recently off 1.5% to $5.93.

And Federated Investors (FII), a Pittsburgh-based investment manager, lost 2.6% to $41.19 on a downgrade to market perform from outperform at Keefe Bruyette.

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