A slew of negative headlines weighed on the financial sector Wednesday, with
leading the way.
The investment bank reported a nearly 60% drop in its second-quarter earnings, even after realizing a $1.43 billion pretax gain from asset sales. Morgan rebounded 1.6% to $41.24, as the results beat watered-down estimates from analysts. CFO Colm Kelleher blamed the losses on failed energy bets and a slowdown in investment banking business. Analysts voiced concern about the company's future earnings, since most of the earnings in this quarter came from asset sales. On Tuesday, rival
reported a profitable quarter, only highlighting Morgan's dismal numbers even more.
Financial Sector Index recently was off 66.79 to 6813.83.
shares collapsed 39.7% to $8, after the futures and options broker said tight credit spreads would negatively affect its first quarter results. The company said it would probably have to raise $300 million to pay off a loan and its net revenue forecast is $28 to $58 million below analyst's expectations.
Fifth Third Bank
plummeted 19.9% to $10.20, after the regional bank said it will be cutting its dividend by 66% and will have to raise at least $2 billion in capital. Cincinnati-based Fifth Third has suffered 10 straight quarterly declines and expects credit losses will result in a second-quarter profit of one cent to five cents per share.
A report on the banking sector released by
on Tuesday continued to do damage to
. The report said that the banking sector was not likely to recover until 2009 and would likely need to raise $65 billion more in capital on top of the $120 billion already raised to cover losses. Wachovia dropped to a 16-year low and was lately down 1.3% to $16.93.
continued its slide as
reported that CEO Richard Fuld would consider a sale of the company. Shares in the investment bank slid 1.4% to $24.80. Lehman has struggled recently with a management shake-up and huge losses.
Investors sold off
Bank of America
as mortgage application volume fell by nearly 9%. That bit of data combined with the other gloomy forecasts conspired to pull the banking giant down. BofA dropped to $28, its lowest level since 2002, but recently was selling down 2% at $28.63.
received word that antitrust regulators cleared the sale of CitiStreet to
for $900 million. Citigroup has been diligently shedding assets as it deals with its massive losses due to the mortgage market meltdown. The CitiStreet unit, a joint venture with
provided record-keeping and administrative services to retirement plans. Citi's stock was up 15 cents to $20.61.