Plunging bank shares lead markets lower

Markets tumbled in the first hour & remained at the low levels for the rest of the day. Dow was off 185, decliners over advancers 4-1 & NAZ was down 40. All averages finished near the lows.

Banks sold off badly on rumors about more failures following news stories on bank failures yesterday. The Financial Index started rising modestly to 198 & then plunged for the rest of the day. A good rule of thumb is that a change of 10+ is a very big deal making this sell-off a very big deal.

AIG (AIG) has had a wild ride in the last week. Starting under 35, it shot up 20 points & has lost most of that in the last 2 days. This is not the type off action that is appreciated in markets which are already greatly overbought.


S&P 500 FINANCIALS INDEX

Value 187.09

Change -10.39

% Change -5.3%

S5FINL:IND




AIG --- 1 week




The Alerian MLP Index lost ground in the market sell off, falling 2¼ to the 235s (lowest since mid Jul). The REIT Index was down 8½ & junk bond funds were weak. Risk averse is coming into play, as it did at the start of 2009. Treasuries were higher, the yield on the 10-year Treasury bond fell 3 basis points to 3.38% near the lowest levels in over 3 months.

Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months




Oil got caught up in the selling taking it below 70 again.

CLV09.NYM

..Crude Oil Oct 09

..68.17

.. 1.79 ......(2.6%)

Selling in bank stocks came from rumors about possible bank failures. A NYSE floor trader on Bloomberg TV said that put positions (betting on lower prices) on Wells Fargo (WFC) were up sharply. WFC was down 1.31 along with all banks. On low volume days, rumors become the biggest stories of the day causing big swings in share prices. This is the same day that Bank of America (Dow stock), down 1.13, is offering to repay part of its $20B loan aid from the gov. Wells Fargo has received $25B in gov aid.

Bank of America Aims to Repay Some US Aid, WSJ Says


Wells Fargo --- 1 year




Bank of America --- 1 year





Cash for Clunkers boosted sales in Aug at Ford (F), Toyota (TM) & Honda while Chrysler & General Motors (GM) suffered sales declines. Ford sales were 18% above last year's depressed numbers. Toyota & Honda Motor Co. posted year-over-year gains of 6.4% & 9.9% respectively. Chrysler sales fell 15% & GM sales fell 20%. Sales made in Aug may cannibalize sales in the fall.

•Ford, Toyota, Honda U.S. Sales Rise on `Clunkers' Program as GM's Decline


American Airlines is laying off more workers, unemployment worries are dragging on.

• American to cut 921 flight attendant jobs- AP

This was a rough day for the markets. It's always tough to figure out how significant the decline was given the light volume. But a such a quick loss of confidence in the bank stocks which have been market leaders is very discouraging.

Dow Jones Industrials --- 6 months