Financial Woes Continue to Weigh on U.S. Stocks
06/20/08 - 11:52 AM EDT
Mike Taylor
Updated from 10:51 a.m. EDT
Stocks on Wall Street continued to droop Friday as traders dealt with rising crude oil prices and another round of questions about the state of the financial sector. The S&P 500 was down 13 points at 1330, and the Nasdaq was falling 41 points at 2421. The Dow Jones Industrial Average was losing 124 points to 11,939. As investors geared up for the new session, the monoline insurers, who have had so much sway over the market in recent months, were once again weighing down the financial group and the major indices. Following the prior close, Moody's downgraded both MBIA (MBI Quote - Cramer on MBI - Stock Picks) and Ambac Financial (ABK Quote - Cramer on ABK - Stock Picks) from AAA. Standard & Poor's and Fitch have already made similar moves. MBIA was off 7%, and Ambac was losing 1% after falling as much as 5% in early trading. Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks) and Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) suffered as Lehman Brothers reduced its earnings estimates for the mortgage buyers. Fannie fell 4%, and Freddie tumbled 6%. Offering further bad news for the financial sector, Merrill Lynch analyst Edward Najarian said U.S. banks were in "capitulation mode," forecasting dividend cuts and capital raising at firms such as Bank of America (BAC Quote - Cramer on BAC - Stock Picks) and Wachovia (WB Quote - Cramer on WB - Stock Picks). Both stocks were down around 1%. The financial space experienced a wide, hard selloff. Barclay's (BCS Quote - Cramer on BCS - Stock Picks), Citigroup (C Quote - Cramer on C - Stock Picks) and Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) were all trading lower. "You're now starting to see the credit slowdown; the credit markets aren't going to come back into recovery mode at least until 2009," said Chris Johnson, CEO and chief investment strategist at Johnson Research. "We looked in at March when the XLF (XLF Quote - Cramer on XLF - Stock Picks) shares hit $22, on the Bear Stearns day." At that point, he said, "We started looking at the financials ... as a value play. It could be that we were wrong, and we're re-evaluating our financial plays right now."
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