The ongoing credit crisis continued to crop up in various incarnations and make for a rollercoaster-like day, with the financial sector getting pulled from a morning jump to an afternoon slump that seemed to be easing just before a finish in the red. The NYSE Financial Sector Index closed off 0.3% to 8,181.6, and the KBW Bank Index ended down 0.1% to 88.79. One of the day's more positive developments was the progression of another Federal Reserve effort to inject liquidity into the market -- the first of four planned auctions allowing banks to borrow below the discount rate for 28 days. Out of 93 U.S. banks bidding $61.6 billion, the Fed today accepted $20 billion worth. But putting a damper on things was new data from mortgage-research company RealtyTrac, which said that November foreclosures surged 68% from a year ago. This comes a day after the Fed proposed a plan to protect consumers from "unfair or deceptive" marketing practices that may have led to many of those foreclosures. On thin ice at Standard & Poor's, meanwhile, were bond insurers Ambac ( ABK), MBIA ( MBI) and Security Capital Assurance ( SCA). S&P gave them all a negative outlook, which means they're in danger of losing their AAA ratings. That might have far-reaching implications, since it could put into question the ratings of all the securities each has insured.
Ambac recovered to close up 1.8% at $27.46, but MBIA lost 2.5% and SCA gave up 1.5%.
S&P also cut ACA Capital ( ACAH) to junk from its former investment-grade A rating, though The New York Times also reported that Merrill Lynch ( MER), Bear Stearns ( BSC), and other banks are in negotiations to bail out the firm. The Times cited two people briefed on the situation. That seemed to boost ACA, which now trades as a penny stock on the pink sheets. But, after more than doubling, shares still closed at just 65 cents. Goldman Sachs, meanwhile, cited spreading credit-market turmoil in downgrading Britain-based Barclays ( BCS) to sell and Switzerland's UBS ( UBS) to neutral. Fellow foreign banks Natixis and HBOS, respectively of France and the U.K., were also cut at the brokerage, according to Marketwatch. Barclays and UBS lost 3.3% and 2.5% on the NYSE. And Fifth Third Bancorp ( FITB) disclosed after market close yesterday that it will set aside about $275 million to cover loan-and-lease losses in the fourth quarter -- more than double the comparable figure from last quarter. That, along with a dime-a-share noncash charge for settling Visa antitrust litigation, will help pull down fourth-quarter earnings to between $2.19 and $2.22 a share. Analysts polled by Thomson Financial are seeking $2.71. Today, Fifth Third got a
downgrade at Fitch ratings. The Cincinnati bank also upped its dividend by 10% to 44 cents a share, but its stock ended down $1.03, or 3.9%, to $25.53.
Also issuing disappointing guidance was Ace ( ACE), whose 2008 profit outlook of $7 to $7.50 a share leaned to the low end of expectations. Allstate ( ALL) said insurance claims related to the recent Southern California wildfires have cost it between $315 million and $335 million this quarter, and Macatawa Bank ( MCBC) announced that a burgeoning loan-loss provision will slice 36 cents a share off its fourth-quarter bottom line. Ace shares were down 1.2% to $60.11; Allstate was down 2% to $50.34; and Macatawa shares took one of today's severest losses, plunging 18.2% at $8. Elsewhere, Sallie Mae ( SLM) CEO Albert Lord said the student lender
might have to cut its dividend amid rising loan defaults, according to published reports. In response, shares of the Reston, Va., firm fled down more than 20% to $22.89. We now turn to Morgan Stanley ( MS) which -- despite posting its first-ever quarterly loss -- gained ground on word of a $5 billion cash infusion from China Investment Corp. Primarily due to a ballooning mortgage-related writedown of $9.4 billion, the fiscal fourth-quarter shortfall came to $3.59 billion, or $3.61 a share, to reverse a year-ago continuing-operations profit of $1.87 a share. S&P put the bank on CreditWatch with negative implications, and Fitch affirmed its investment-grade rating while still maintaining its negative outlook. Still, Morgan shares were up $2.01, or 4.2%, to $50.08.
Goldman Sachs ( GS) closed 1.3% higher a day after the New York brokerage posted a
better-than-expected profit in the fiscal fourth quarter, though that still doesn't recover all of yesterday's losses. And commodities exchange Nymex ( NMX) gained on a Deutsche Bank upgrade to buy. The analyst called it the top exchange for investors over the next year, according to the Associated Press. Nymex shares ended up $1.96, or 1.5%, to $129.86. In more solidly positive news, TD Ameritrade ( AMTD) spent most of the day trading well in positive territory after the Omaha, Neb., online broker pushed its current-quarter outlook up to 39 cents a share from the prior range of between 27 cents and 33 cents. The Street has quarterly income at 32 cents a share, less extraordinary items. Shares finished up 0.7%. Morgan, Goldman and Ameritrade all helped pull the Amex Securities Broker-Dealer Index up 0.9% to 202.52. Finally, MasterCard ( MA) added 5.2% at $212.34 in unusually heavy action after vowing it will appeal the European Commission's decision to force the credit-card company to halt cross-border processing fees charged to customers in Europe. The Commission gave it six months to comply, per Reuters, else the company will face daily penalty fees.