Grim news continued to stream out of the financial sector before a late rally on Tuesday, as a host of companies suffered due in part to late financial reports.
Standing on the window ledge, regional bank
said it had received notices from buyers of some of its subprime loans alleging it was in default on covenants in the purchase agreement. Fremont could not provide information regarding its net worth, as it was late filing documents with the Securities and Exchange Commission. If the buyers don't agree to waive the covenant, Fremont warned it could go out of business. The Brea, Calif.-based bank's stock plummeted 28.5% to close at 50 cents.
Also unable to deliver financial reports on time, insurance provider
dropped 9.9% after it filed for an extension to report annual earnings. The Carmel, Ind.-based insurance company expects to break even on income. It hopes to release its numbers on March 17. Shares closed down $10.49.
also are late filing financial reports. Radian shares sliced another 10.9% off of its value when the earnings release was delayed due to the inability to give a fair value on its collateralized debt obligations, or CDOs. PMI can't file on time because it needs more information on
Financial Guaranty Insurance Co.
, a company it had invested in. PMI was losing 5.2% to $6.43.
Elsewhere, banking giant
took two punches and slid 4.3% to $22.10, a nine-year low. First the head of a Dubai-owned investment firm said Citigroup may need more cash and then Merrill Lynch lowered its earnings outlook. The Merrill analyst suggested that Citi will be forced to take more writedowns as the credit crisis continues. Citi countered later in the day by saying it was comfortable with its capital position, according to
Banks on the whole were trading down on the fear of more writedowns. Also, lawmakers on Tuesday heard about the current state of the nation's troubled banking industry from the regulators responsible for overseeing it.
fell 26 cents to $13.39,
Bank of America
lost 40 cents to $38.78 and
dropped 93 cents to $29.48.
Financial Sector Index was down almost as much as 2.9% earlier Tuesday, but yet another late afternoon
report about an imminent deal by a consortium of banks to rescue bond insurer
rallied stocks. The index recovered to 7,204.10 for a loss of 1.1%.
First quarter profits at the
Bank of Montreal
crumbled 27% as writedowns linked to the U.S. subprime mortgage market and support for two structured investment vehicles hit Canada's fourth largest bank. The bank's stock lost 4.1 % to $46.92.
Wachovia also cut earnings estimates for investment banks. Wachovia said valuations for the brokers are at a five-year low, corresponding with expectations of weaker normalized returns. Wachovia picked
as better long-term investments than
. Lehman dropped 26 cents to $48.38 and Goldman slid $1.48 to $163.60. Merrill was down but recovered to a gain of $1.19 to $49.83. Bear gave back 15 cents to $77.17 and Morgan sold off 23 cents to $41.35.
One of the few companies trading in the green was investment firm
, which was up 2.9% to $16.87 after Oppenheimer initiated coverage with a perform rating.