Updated from 9:43 a.m. EDT
The major New York indices were down in the dumps Tuesday morning as traders fussed over discouraging quarterly results from the regional banks, so-so economic data and
Chairman Ben Bernanke's Senate appearance.
Dow Jones Industrial Average
was recently off 162 points to 10,893, and the
was down 20 points at 1208. The
gave up 28 points at 2185.
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 17%, and Freddie dropped 25% in midmorning trading.
Earnings statements from the financial sector offered little solace for fretting investors. Regional bank
posted second-quarter earnings of $1.35 a share, up from $1.07 a year ago. 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.
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 raised guidance for 2008, while Eaton was less optimistic going forward.
Away from earnings,
announced it would be cutting jobs, closing factories faster and suspending its dividend 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.
Moving to commodities, crude oil was down 41 cents at $144.77 a barrel. Gold was rising $12.30 to $986 an ounce.
Amid the insecurity surrounding the financials, gold miners were showing gains.
were each up more than 2%.
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 18/32 in price, yielding 3.79%. The 30-year note was up 5/32 to yield 4.44%. 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 at least 1.9%, while the Hang Seng of Hong Kong dropped 3.8%.
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