Financial stocks swooned late after a day of mixed trading Wednesday, as shares of government-sponsored mortgage giants
were hit hard by renewed concern about their capital positions.
Shares of Fannie and Freddie rebounded Tuesday, after their regulator tempered fears about a proposed accounting change's potential impact on their liquidity had sent the stocks plummeting on Monday. On Wednesday, however, credit-default swaps tied to the companies' $1.45 trillion of AAA-rated debt were trading at levels that imply the bonds should be rated A2 by Moody's Investors Service,
reported, citing data compiled by Moody's credit strategy group. This implies concerns about the companies' capital positions. Fannie shares plunged 13.1% to $15.31, while Freddie fell 23.8% to $10.26.
The steep decline for Fannie and Freddie weighed heavily on the financial sector, as the
Financial Sector Index closed down 213.80 to 6,015.74.
Another big loser on the day was
Investment Technology Group
, which plunged 11.5% to $29.53 on very heavy volume. The brokerage technology company announced that its trading tools delivered a 5% increase in average trading volume. It also said it expects its total non-U.S revenue to be between $48 million and $49 million for the second quarter, lower than expected. An analyst at BMO Capital Markets promptly cut his estimates for the company, but continues to rate it outperform.
Another victim of analyst comments was
, which slid 8% to $14.29 after a Merrill Lynch analyst suggested potential buyers would be unwilling to pay $16 to $20 a share for the troubled bank.
shares declined 9.3% to $29.74 after Fitch Ratings said it may cut the brokerage's debt rating due to anticipated writedowns and a dim outlook for earnings for the rest of the year. It was the only major investment bank placed on review. Merrill currently rates an A+ rating, while
are rated one notch above. Still, Goldman shares fell 3.4% to $169.02 and Morgan Stanley shares closed down 6.2% to $33.99.
On the flip side, shares of bond insurer
surged 27% in early trading after announcing a smaller number than the market had anticipated for its collateral posting requirements. Ambac posts collateral for its guaranteed investment contract business. Shares sold off after the Fannie and Freddie news, however, closing down 4.7% to $2.02.
This article was written by a staff member of TheStreet.com.