Wall Street Opens With Steep Losses
10/10/08 - 09:47 AM EDT
Mike Taylor
Updated from 9:27 a.m. EDT
Stocks on Wall Street opened to the downside Friday, as the credit crisis wore on and financial stocks, hammered all week, looked ready to take another drubbing. The Dow Jones Industrial Average was sinking 125 points at 8453, and the S&P 500 was losing 14 points at 895. The Nasdaq was down 17 points at 1627. After a day of whipsaw trading, stocks sold off hard into the close Thursday. Skepticism about government intervention in the financial markets and heavy selling of financial and insurance stocks contributed to declines in the major indices. The Dow Jones Industrial Average dropped 7.3%, the S&P 500 gave back 7.6%, and the Nasdaq tumbled 5.5%. Battered financial firms Morgan Stanley (MS Quote - Cramer on MS - Stock Picks) and Goldman Sachs (GS Quote - Cramer on GS - Stock Picks) look to again be in focus ahead of the new day's trading. Ratings agency Moody's said it may cut Morgan Stanley's credit rating, and lowered its credit outlook for Goldman to negative. Amid the increasing concern about banks, the U.S. government was considering guaranteeing bank debt and insuring all domestic bank deposits, according to a report in The Wall Street Journal. The report precedes a meeting of the Group of Seven industrial nations Friday. The economic powers plan to discuss a coordinated response to the global credit crisis. Traders were closely eying an auction of credit default swaps related to bankrupt brokerage Lehman Brothers. The auction is expected to bring heavy losses to sellers of the swaps, which function as insurance against a default on company defaults on their debt. The market for these derivatives has been tied up as credit markets remain tight. The cost of borrowing among banks as measured by three-month Libor was still rising. The three-month rate climbed 7 basis points to 4.82%, according to Bloomberg.com. Following a heated battle with Citigroup (C Quote - Cramer on C - Stock Picks), Wells Fargo (WFC Quote - Cramer on WFC - Stock Picks) appeared set to buy Wachovia (WB Quote - Cramer on WB - Stock Picks) unencumbered. Citigroup said it will continue to pursue $60 billion in damages for breach of contract but would not try to overturn a merger between Wells Fargo and Wachovia. Citi had announced a Wachovia acquisition on Sept. 29, only to trumped days later by a new bid from Wells. The Journal also reported that insurance firm AIG (AIG Quote - Cramer on AIG - Stock Picks) took out an additional $9 billion in government loans, bringing its total borrowing from the U.S. in the past three weeks to $70.3 billion. The company continues to attempt to sell its assets in a struggle to stay afloat.
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