The financial sector could only hang on desperately against yet another wave of bad news Wednesday, including another recession forecast.
Goldman Sachs was the newest bearer of bad tidings , predicting today that the U.S. gross domestic product will undergo two consecutive quarters of contraction this year -- 1% shrinkage in both the second and third quarters -- which is the generally accepted definition of a recession. That, said Goldman, will likely persuade the Federal Reserve to cut the fed funds target rate to 2.5% from the current 4.25%. Following that release, the NYSE Financial Sector Index lurched in and out of the red, then remained down for most of the day before recently managing to climb 0.2% to 7,717.94. But the KBW Bank Index continued to struggle, lately losing 0.7% to around 80, and the Amex Securities Broker-Dealer Index hovered near the flat line. Component MBIA ( MBI) a battered bond insurer, was sliding another 5.5% after scrambling to raise capital by chopping down its dividend to 13 cents a share from the prior 34 cents, as well as setting plans to offer $1 billion worth of surplus bonds to institutional buyers. The bonds are planned to mature in 2033, though they will be callable every five years after they're issued. MBIA said these moves will ensure maintenance of its crucial triple-A ratings at Moody's, Fitch, and Standard & Poor's. Last month, the firm shocked investors and analysts alike by revealing heavy exposure to collateralized debt obligations (CDOs) backed by other CDOs, or CDOs-squared.