Financial stocks rallied along with the wider market as crude oil prices fell Wednesday, despite negative analyst sentiment for investment banks like
Lehman managed to trade up 4.8% to $13.70 even though analysts at Goldman Sachs and Sanford Bernstein suggested it and a host of other brokers would take hits in the third quarter.
The New York Post
also reported that a financing deal between Lehman and a South Korean fund fell apart.
The Goldman report maintained that
would be one of the hardest hit in the third quarter as a result of its exposure to the collateralized debt obligation market. Yet, Merrill jumped 2.5% at $24.41. Goldman also lowered estimates for
due to the hit it took on auction rates securities. But JPMorgan gained 4% to $37. And the analyst even called for a short position in
, but that bank held its own and ticked up 1.8% to $17.49.
The one name that the Goldman analyst maintained a long position in was
, which tumbled 1.8% to $37.40. The Bernstein analyst also cut his estimates for the same names citing the slowing M&A business.
itself was not spared, as Bernstein reduced its forecast by 20%. Goldman finished fractionally higher to $158.25.
Financial Sector Index started out in the red zone, but recovered to advance 59.81 to 6,084.76.
Government-sponsored mortgage giants
were among the hardest hit financial stocks on Wednesday. Fannie tumbled 26.8% to $4.40 and Freddie fell 22.1% to $3.25, as shareholders fretted that the government will end up bailing the companies out -- and likely wipe out the common stock.
The concern in the mortgage market has stretched the downtrend in bond insurers for another day.
dropped 16.6% to $3.31 and
gave back 8.3% to trade at $3.22.
, which holds roughly $600 million in preferred Fannie and Freddie stock slid 7.4% to $8.78.
This article was written by a staff member of TheStreet.com.