That was beyond ugly.
What a terrible day, nothing held up at all. OK, well not nothing… JOSB held up, SMCG actually had a good day. FIG found some buyers. CRMH must be in a very different business from AIG. TSBK must be some great bank, up 7.7% today as was HABC! What is going on with FAF, up again today. BBY bought NAPS for an 86% gain. The whole health care sector showed some bright spots as did services but, for the most part – ugly… Decliners out paced advancers 81-to-1 on 7.88Bn shares of NYSE volume, with 700 (about 10%) stocks making new lows.
The overall financial sector took a 10.4% hit, sending the SKFs up 17% to $132.52 after a bumpy trading session. Tomorrow we get both GS and MS earnings and we don't have to wait for the rest of the big investment banks to report because there aren't any left! In their bankruptcy filing, LEH listed $613Bn in debt, a record for a bankruptcy, raising the bar on "too big to fail."
AIG may not be too big to fail after a ratings downgrade hit them this evening, the company lost $18Bn in value (61%) in today's trading. LEH was suspended from energy and commodity trading in London. The firm can still trade by phone, LME spokesman Thom Lant said. Each trade has to be approved by PricewaterhouseCoopers LLP, which is handling the winding down of the business.
The SEC said they will tighten regulations regarding naked short selling but will not "ban" it like they did in July. At least a full rule change won't expire… The changes the SEC may issue as early as this week target naked short-selling, in which traders never borrow shares. The agency is concerned manipulative investors may use the sales, which are legal in some circumstances, to drive down prices by flooding the market with orders to sell shares they don't have. Seems a bit late doesn't it?
This is big news from the Financial Times: "Investors in Royal Dutch Shell and BP are facing increasing risks as a result of the companies' involvements in Canada's oil sands, fund managers and campaign groups will tell a meeting in London on Tuesday. Environmental groups such as Greenpeace and the WWF, as well as some socially responsible investment funds including Co-operative Asset Management, are warning that developing the oil sands is not only environmentally damaging but also financially risky. They argue it is increasingly likely that there will be a price put on carbon dioxide emissions in North America, threatening the economic viability of oil sands projects, which generally have much higher emissions than conventional oil developments."
Lots of repercussions to that article. Both companies have been severely beaten down already as oil tumbled but SU has held up pretty well considering and this could send them over the edge, as will sub-$90 oil so a nice put opportunity there is possible. On the other hand, if Canadian oil sands becomes unpalatable, that's a lot of short and long-term oil off the market!
This morning I talked about the very nasty WSJ headline (and remember Friday how they took that poll at the end of a very negative article) and Gawker had a nice picture of what greeted the average Wall Street trader as he went to work this morning:
Negative sentiment and lack of leadership are the key ingredients to a financial crisis. McCain quickly jumped in to fill the gap, running ads all over the country that leads off with the tag-line "Our Economy in Crisis." I'm sure that's cheering everyone right up! Obama, meanwhile, met with Paul Volker, Bob Rubin, Larry Summers and Laura Tyson and "They discussed what to expect from financial markets today and over the course of this week, how these events would impact the overall economy, and what steps should be taken to address the problems in our financial markets and economy more broadly." I'm not sure what good it will do, even if they have a plan, it's a long time until January…
Tomorrow we get the CPI report at 8:30 along with Net Foreign Purchases at 9 and, of course, the FOMC Policy Statement at 2:15 but if the Fed is going to cut, it's hard to imagine they are going to wait until then to tell us. In all the morning excitement we failed to notice the Sept. NY Empire State Index came in at a TERRIBLE -7.4 (down 10.2) and Capactiy Utilization dropped to 78.7% (down 1%) and Industrial Production fell 1.1%, much worse than the -0.3% expected so those 3 items could have whacked the market for 300 points on a good day.
So things could have been worse. Asia will play catch-up in the morning as they were closed today but that's to be expected and has little to do with how the US markets will behave. It will all come down to confidence and we'll either get some or we won't but it sure is a precious commodity these days.
