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Financial stocks continued to slip Tuesday, as

Lehman Brothers

( LEH) continued to suffer from negative sentiment.

JPMorgan analyst Kenneth Worthington cut his earnings estimates for Lehman through 2009, saying he expects $4 billion in writedowns in the third quarter. The investment bank is reportedly shopping its

Neuberger Berman

asset management unit, but Worthington does not think a sale is likely. Lehman has been under pressure all year as it struggles to overcome losses related to the credit market and mortgage market meltdown. The stock slumped 13.1% to $13.07.



Financial Sector Index declined 151.71 to 6,032.53 in recent trading.

In day three of its most recent losing streak,

Freddie Mac

( FRE) tumbled 6.4% to $4.11. Freddie issued more five-year notes, but the cost was 113 basis points over Treasuries and more than the previous issuance. As the costs rise, investors have become increasingly worried over the fate of Freddie and fellow government-sponsored mortgage giant

Fannie Mae

( FNM). Fannie shares slid 4.1% to $5.90.

One big loser for the day was

Sallie Mae


, which gave back 16% to $12.99. The student lender has lost almost half its value since June, as the market worries about students returning to college with fewer lending options.

Fellow student lender

First Marblehead


dropped 26.3% to $3.79. On Monday, it announced that

Goldman Sachs


had completed a transaction that resulted in a cash infusion for the company. But it quickly shook off that positive news and continued to sell off.

July housing starts fell 11% to their lowest level in 17 years, the Commerce Department reported Tuesday. Mortgage insurers like



plunged 15.3% to $3.99, while



fell 12.6% to $7.15.

Elsewhere, there were some winners in the sector.

Federated Investors


jumped 4.4% to $32.08 after announcing a first-ever special dividend. The money market fund manager has performed better than its peers enabling it to share its wealth with shareholders at a time when many institutions have cut dividends. The $3 dividend will be paid in the third quarter, on top of a 24 cents dividend paid last week.

And finally,

WellCare Health Plans


shot up 10.2% to $42.15 after agreeing to pay $35.2 million to the U.S. Attorney in Florida for overstating profits. The payment was much lower than analysts had been expecting and the stock rose accordingly.

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