Friday's Financial Winners & Losers
Financial stocks leapt to finish the week substantially higher on Friday, once again propelled by comments out of the
Federal Reserve
.
The sector had taken a tumble yesterday following a healthful Wednesday rise, which had been inspired by Fed Vice Chairman Donald Kohn's remarks
suggesting that another rate cut is forthcoming.
Today, however, Fed head honcho Ben Bernanke helped to vault financial stocks stratospherically after saying that a number of unfavorable conditions "seem likely to create some headwinds for the consumer in the months ahead." That generally reinforced the rate-cut hopes that Kohn had already sparked two days earlier.
The
NYSE
Financial Sector Index jumped around 182 points, or 2.1%, to 8,681.91. The KBW Bank Index climbed some 3 points, or 3.1%, to 97.17.
Also contributing to the jubilant mood was talk that government officials are nearing a plan to
temporarily freeze the "teaser" interest rates of some subprime-mortgage loans, which were otherwise planned to reset at much higher fixed rates following an introductory period. This is in the hope of avoiding a feared ensuing landslide of foreclosures.
According to
The Wall Street Journal
, regulators are meeting with executives from
Citigroup
(C) - Get Citigroup Inc. Report
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, which added 3.1%;
Countrywide
(CFC)
, which surged 16.3%;
Washington Mutual
(WM) - Get Waste Management Inc. Report
, up 8.3%; and
Wells Fargo
(WFC) - Get Wells Fargo & Company Report
, up 6.2%; among others. The
Journal
cited people familiar with the negotiations.
Also rising sharply on this news were the lately languishing mortgage investors
Freddie Mac
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and
Fannie Mae
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, each of which soared nearly 19%, in addition to financial guarantors and mortgage insurers.
Like all other entities exposed to the subprime mess, shares of these firms -- for example,
Ambac
(ABK)
,
MBIA
,
MGIC
(MTG) - Get MGIC Investment Corporation Report
,
Radian
(RDN) - Get Radian Group Inc. Report
, and
PMI
(PMI)
-- have suffered a calamitous few months. Today, shares leapt 8.9% or more.
Elsewhere, the
Journal
reported that new
Merrill Lynch
(MER)
CEO John Thain is preparing to bring in
NYSE Euronext
(NYX)
Finance Chief Nelson Chai. Per the report, talks have already entered an advanced stage, according to people familiar with the matter. Thain was recently hired from the NYSE in order to replace the
ousted Stanley O'Neal.
Merrill shares closed up $2.53, or 4.4%, to $59.94; NYSE hugged the flat line for most of the day before ending fractionally higher at $86.60.
Morgan Stanley
(MS) - Get Morgan Stanley Report
also booked only lackluster gains after announcing the
retirement of Co-President Zoe Cruz who, to many, had been the heir-apparent to CEO John Mack. The retirement will take effect Dec. 1. Among other simultaneously announced management changes, Walid Chammah in London and James Gorman were appointed co-presidents. Shares traded mostly in positive territory, but flirted with the flat line before ending just 0.7% higher.
Bear Stearns, meanwhile, levied downgrades on
Deutsche Bank
(DB) - Get Deutsche Bank AG Report
,
UBS
(UBS) - Get UBS Group AG Registered Report
and
Credit Suisse
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, but shares of the banks persisted upward nonetheless. Deutsche rose 1% to $131.75; UBS gained 2.3% to $50.48, and Credit Suisse ticked up 4 cents to $60.32.
Beleaguered online broker
E*Trade
(ETFC) - Get E*TRADE Financial Corporation Report
wasn't so lucky. Shares held on for most of the day, but ultimately lost 4.6%, after BMO Capital Markets cut the stock to market perform from outperform. Credit-ratings firm Moody's, moreover, lowered its long-term senior debt rating. That follows yesterday's announcement of a
$2.5 billion cash infusion from Citadel Investments, as well as the resignation of CEO Mitch Caplan. Shares closed down 22 cents to $4.60.
Also among the rare financial decliners was
BankAtlantic Bancorp
(BBX) - Get BBX Capital Corporation Class A Report
, which got a downgrade to neutral from buy at Janey Montgomery Scott. Shares of the Florida bank finished 3% lower at $3.85.
