Monday, July 7, 2008

Financials sink stocks

Markets were hammered hard by a major sell-off in financials, following financing problems at Fannie Mae (FNM) & Freddie Mac (FRE). Wow, that was a lot to say. FNM & FRE each fell about 3 on worries about an accounting change might require them to raise more capital (after raising capital last year). Financials sold off big once again, this time on worries that they could have similar problems trying to raise more capital. Dow had been up 100 early in the day but then sold off to down 100 a couple hours later. Dow ended down 56, decliners ahead of advancers 2¼ to 1 while NAZ was essentially even. The important S&P 500 declined 10 to 1252, below the 1270 line. However, some are saying 1235 is a more important test. No matter how the bread is sliced, the S&P 500 index is in big trouble. REITs sold off in sympathy with the financials. Oil pulled pack 3½ on the latest rumors that Israel might not have to attack Iran & on a stronger dollar. MLPs sold off in sympathy with lower oils (XOM, CVX, etc.). The Alerian MLP index closed in the 269s, nearing 262 low reached earlier this year.

These are troubling times, not for the feint of heart. The credit crisis will take a lot of time to work out, but homework done to separate the good ones from the bad will pay off!

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