Updated from 10:53 a.m. EDT
The major New York indices bounced off their lows to trade unevenly in negative territory as a plunge in oil prices counterbalanced queasiness over today's quarterly results from the regional banks, so-so economic data and
Chairman Ben Bernanke's Senate appearance.
Dow Jones Industrial Average
was recently off 18 points to 11,036, and the
was down 5 points at 1223. The
edged down 3 points at 2209.
Bernanke testified before the Senate Banking committee about the Fed's decision to grant ailing mortgage packagers
access to its discount window to raise capital. He also said that as weakness in the dollar contributes to rising oil prices, inflation remains a risk to the U.S. economic outlook.
At the same time, President George W. Bush spoke at the White House, calling on Congress to provide aid to Fannie and Freddie. He also reiterated his request that Congress lift a ban on offshore oil drilling.
Fannie and Freddie faced an additional blow this morning when ratings agency Moody's cut Freddie's financial strength and preferred stock ratings and put the preferred stock rating on watch for a further downgrade. Shares of Fannie were down 24%, and Freddie was dropping 26%.
On the other hand, crude oil prices dropped $7.04 to $138.14 a barrel, providing support for the falling market.
James Williams, energy economist at WTRG Economics, said that a resumption in
Nigerian crude oil production offered relief on the supply side. He also pointed to tomorrow's petroleum report, which he said will confirm that the U.S. is using a great deal less oil than it was a year ago. This trend is corroborated by a lowered forecast for world oil demand from OPEC, he said.
Brazilian oil producer
announced normalized production from its platforms in the Campos Basin despite a strike by its workers.
Williams said it's unusual for oil to fall at the same time as the dollar. "The significance of it, if you can take anything from a single day, is that the market's perceiving that demand for oil is weakening, which is driving oil down in spite of the dollar," he said.
After rising earlier in the day, gold prices were even at $973.70.
Despite falling oil prices, earnings statements from the financial sector were offering little solace for fretting investors. Regional bank
of $1.35 a share, up from $1.07 a year ago. Factoring out charges, the company earned $1.40 a share, 4 cents better than analysts' expectations. State Street also raised its EPS forecast for 2008.
swung to a loss of 11 cents a share from a 20-cent profit a year ago, falling short of the Street's forecast of an 8-cent per-share loss. Sector buddy
earnings per share fell 12 cents year over year to 53 cents and fell short of the Thomson Reuters consensus of 59 cents a share.
Following a report that it would lay off employees in September as it tries to reduce costs,
shares were among the few bank stocks to rise in early trading, but a great deal of those gains were given back. The stock was recently up 1.9%.
The regional banks were adding pressure to the market Monday as the government seizure of
and a Fed and Treasury-sponsored plan to bolster Fannie and Freddie reminded investors that the subprime mess and credit crunch have yet to fully unwind.
"Everybody's trying to find out who the next IndyMac is," said Art Hogan, chief market strategist for Jefferies & Co. "Any bank that's trading under t$10 has been cut in half in the past week." Although Fannie Mae and Freddie Mac's debt have been rescued, the equities have not, he said. In addition, "Ben Bernanke hasn't said anything that makes us feel any better." Hogan said the Dow could fall another 920 points before the market turns around.
Federal Deposit Insurance Corporation chair Sheila Blair said on
"The Early Show" today that deposits in U.S. banks are "absolutely safe."
In another blow to confidence in the banks, Oppenheimer analyst Meredith Whitney downgraded
to underperform from perform, citing a high probability of declining assets and worsening losses for the troubled company.
Similarly battered brokerage
is trying to find a way to go private, said a
New York Post
report that cited unnamed sources. A Fox-Pitt Kelton analyst said yesterday that, because investors are pricing in a
-like scenario for Lehman, it would be better off making such a move.
Meanwhile, consumer conglomerate
Johnson & Johnson
and industrial equipment maker
both delivered financial results that beat analysts' expectations. Johnson & Johnson
, while Eaton was less optimistic going forward.
Away from earnings,
announced it would be
to cut costs at it copes with an increasingly difficult auto market.
suffered as well, as Goldman Sachs removed the telecom firm from its conviction buy list and lowered its price target for the stock 14% to $42.
Investors were also perusing several economic data releases. The New York Empire State Index slipped 4.9 points for July, a smaller loss than the 8 points expected by analysts. The Census Bureau also reported that June retail sales rose 0.1% and, excluding auto sales, climbed 0.8%. Both retail sales results fell short of economists' expectations.
Meanwhile, the June producer price index from the Bureau of Labor Statistics rose 1.8%, a greater increase than May's 1.4% jump and higher than the Street's view of 1.3%.
In the fixed-income arena, 10-year Treasuries were up 12/32 in price, yielding 3.81%. The 30-year note was up 1/32 to yield 4.45%. The dollar was plummeting against the yen and the pound. Early this morning, the U.S. currency hit a record low against the euro at $1.6038.
Globally speaking, major stock indices in Europe and Asia were showing weakness as deepening worry over the U.S. financial sector made its way overseas. The FTSE in London, the DAX in Frankfurt, and the Nikkei in Japan were all down sharply, while the Hang Seng of Hong Kong was even worse, losing 3.8%.