Even though Federal Reserve chairman Ben Bernanke voiced support for an economic stimulus package Thursday, financial stocks took their usual downward track -- and brought the broad market down with them -- amid a stream of disappointing third-quarter results.
By far the biggest price decliner was the already shredded financial guarantor Ambac ( ABK). Shares were taking a nosedive of more than 50% today after Moody's put its Ambac Assurance and Ambac Assurance UK units on review for downgrade, endangering the crucial triple-A financial-strength ratings of both. The parent company's senior debt rating, currently at Aa2, could also get cut. That only added to Ambac's pain following yesterday's triple blow of a CEO departure, a slashed dividend, and a planned offering for $1 billion in equity and equity-linked securities. Its stock was sliding $6.77 to $6.20 in recent trading today, and shares of fellow bond insurer MBIA ( MBI) were recently down by one-third. Other insurance firms that so profoundly rely on those top-notch rankings at credit-rating agencies were also falling through the quicksand: XL Capital ( XL) lost 13.7%; affiliate Security Capital Assurance ( SCA) shed 14.9%; and mortgage insurers MGIC ( MTG), Radian ( RDN), and PMI ( PMI) were off 12.2% or more. In earnings, Merrill Lynch ( MER) today reported a massive fourth-quarter loss of $10.3 billion, or $12.57 a share, from continuing operations. That, along with the prior quarter's $2.3 billion shortfall, pushed the New York brokerage's full-year bottom line deeply into the red: for 2007, Merrill lost $8.6 billion, or $10.73 a share. Analysts polled by Thomson Financial were looking for a loss of just $4.93 for the quarter and $3.33 for the year, excluding special items. As per usual, the cause was colossal writedowns related to investments in subprime mortgages and collateralized debt obligations (CDOs). These totaled $11.5 billion in the fourth quarter, heaping on top of the $7.9 billion worth that the firm already posted in the third quarter. Merrill said it additionally recorded $2.6 billion in credit-valuation adjustments related to hedges with financial guarantors of CDOs. Also swinging to fourth-quarter losses were Huntington Bancshares ( HBAN) -- as it had first warned last week - along with First Horizon ( FHN), Provident Bankshares ( PBKS), and student lender CIT ( CIT). Shares were losing 7.5% or more. Elsewhere, regional banks Comerica ( CMA) and PNC Financial ( PNC), respectively of Dallas and Pittsburgh, each saw quarterly earnings fall by more than half vs. last year. Comerica lately lost $4.37, or 10.3%, to $37.90; PNC was off 5% to $57.96. Away from earnings, Wells Fargo ( WFC) was cut to perform from outperform at Oppenheimer a day after reporting in-line results for the fourth quarter. Shares sank 3% to $26.56. And even online broker TD Ameritrade ( AMTD), with its surging profit of $240.8 million, or 40 cents a share -- a penny better per share than what analysts had expected -- was trading down 8.8%. The NYSE Financial Sector Index was careening downward by 259.48 points, or 3.4%, to 7,384.23. The KBW Bank Index lost 4.3% to 79.06, and the Amex Securities Broker-Dealer Index gave up 5.8% to 179.06. But asset manager BlackRock ( BLK) ranked among the rare financial climbers after it blew away Wall Street expectations with an adjusted fourth-quarter profit of $333.7 million, or $2.52 a share. That represents a 57.6% surge from a year earlier, and per-share income tops the average analyst target by 37 cents. Shares were tacking on $1.02, or 0.5%, to $204.72. Also in the green was BB&T ( BBT). The North Carolina-based regional bank said fourth-quarter operating earnings dipped 6.1% year over year to $415 million, or 75 cents a share -- 3 cents under estimates. Considering the calamitous results at many of its brethren, that isn't such a bad showing. And if last year's hefty merger and restructuring charges are taken into account, BB&T's earnings soared 63.7% year over year. Its shares were adding 44 cents, or 1.6%, to $28.63.
Similarly, Bank of New York Mellon ( BK) spent much of the day in positive territory even after sizable writedowns forced down fourth-quarter income to $520 million, or 45 cents a share, from $2.27 a share a year earlier. With merger and integration expenses stripped out, earnings gained 6 cents on last year to 67 cents a share, though that still misses consensus by 2 cents. BONY shares held their own for most of the day before recently sinking 1.2% to $44.53.