AIG (AIG) managed to lose 60% of its market value today. At one point the stock was off 70%. A partial rescue came in the form of permission from New York State for the huge insurance company to loan money from its operating units to the parent company. This could provide as much as $20 billion.
That did not seem to be enough, at least not in the eyes of the market.
Markets in Japan fell sharply at the open. According to MarketWatch, Japan’s Nikkei 225 dipped 4.5% in early trading. The Topix index shed 4.7%.
In South Korea, the Kopsi plunged 6.2% to 1,386.29.
Douglas A. McIntyre
The collapse of the stock market, particularly shares in large financial companies, will have immediate effects on small businesses. Now that it is clear the the government will not help large brokers and banks, they are more likely than ever to hoard the capital that they can get from emergency Fed loans or from the sale of their operations being done to raise money.
With Google (GOOG) holding a 70% share of the PC-based online search market in the US and a similar amount in most EU countries, the best hope that Yahoo! (YHOO) and Microsoft (MSFT) have to catch up is in the emerging market of searching from handsets.
It appears that Google is opening a lead off the PC as recent figures show it well ahead of its competition in the wireless marketplace.
Today wasn’t just a bad day for financial stocks and for the markets in general. It may have been a real game changer. But interestingly enough, there is now roughly a 32% chance that the FOMC will announce a rate cut at its meeting Tuesday.
After a savage day in which one Wall St. firm closed and another was sold, perhaps there might have been an evening’s respite.
Lehman (LEH) has more than 25,000 employees, 20,000 of which could be out of work. Merrill Lynch (MER) has a staff of more than 60,000. A significant number of them will be pushed aside as the company merges with Bank of America (BAC).
The axe also fell today on many of the poor souls who work at Hewlett-Packard (HPQ) and EDS, which H-P recently bought.
At one point Merrill Lynch (MER) was up to $22.68 because of Bank of America’s (BAC) buyout offer of $50 billion. Merrill closed at $17.05 on Friday.
Wall St. is now so afraid for the future of even the largest banks and brokerage houses that Merrill closed up only 4% at $17.76. Bank of America, after riding to Merrill’s rescue, closed down more than 21% to $26.55, giving up $24 billion in market cap.
Lehman (LEH) is bankrupt. Its stock plunged to $.15 from $67.73.
AIG (AIG) fears that it will be the next to fail. It drops to $3.50 from a 52-week high of $70.13.
Axcelis Technologies’ (ACLS) buyout plan by Sumitomo Heavy Industries is killed. The stock plunges to $1.25 from 52-week high of $6.04.
Evergreen Solar (ESLR) declines as falling oil prices are hurting alternative energy. The stock sells off to $4.47 from a 52-week high of $18.85
GE (GE) falls on concerns about GE Capital. It drops to $23.01 from 52-week high of $42.15
Douglas A. McIntrye
This week seems to be unprecedented for the financial powerhouses and bulge bracket brokerage firms. While Merrill Lynch had to throw in the towel and become a Bank of America subsidiary, Lehman Brothers is essentially chopped liver. Now, we have two crucial earnings reports coming from Goldman Sachs Group (NYSE: GS) on Tuesday and Morgan Stanley (NYSE: MS) on Wednesday.
Covering financial stocks on a day like today is sort of like watching the Chinese ping pong championship. It’s all action, happens faster than most can see, and no one really knows who the winner is. Now, the latest rumors have the Oracle of Omaha, Warren Buffett, and his company Berkshire Hathaway (NYSE: BRK/A, BRK/B), looking at doing a deal to save American International Group (NYSE: AIG). There are things to consider.
AIG (AIG) plans to sell its auto insurance unit, annuity operations, and aircraft leasing division. It sounds a lot like Lehman’s (LEH) plan to spin-off its commercial real estate pool and sell a majority interest in its asset management unit.
We won’t bother telling you the news today that caused the market tank before the open. The brokerage failure of Lehman and the buyout of Merrill Lynch causing Bank of America stock to drop says it all. But there are actually a few good developments which may not last. The first and easiest thing to note would be the substantial drop in oil prices of more than $5.00 to make $96.00 within striking distance since Hurricane Ike’s actual toll on the oil and gas infrastructure was far less than was expected. But there was a key event right after the open for you technicians. The CBOE Volatility Index, the beloved VIX, went north of 30.00 again.
The effects of Hurricane Ike on the Gulf Coast are still being sorted out, but, so far reported infrastructure damage is light. That may change as producers, refiners, and pipeline operators begin more detailed examinations today. But this is part of why oil prices have sold off so much despite the outages and interruptions. Below you can see an update on which major oil and gas companies have released date regarding their facilities which were in Ike’s path.
There is some very hopeful data out there this morning on cancer survival. Bristol-Myers Squibb Co. (NYSE: BMY) and Medarex, Inc. (NASDAQ: MEDX) have released updated survival data from three Phase II studies of ipilimumab in patients with advanced metastatic melanoma in Stage III or IV levels who had previously been treated showing that approximately half of patients who received ipilimumab remained alive beyond one year.
A lot of traders think that GE’s (GE) financial results will be badly damaged by trouble at its GE Capital unit. The worry has the conglomerate’s stock trading at $24.70, below its 52-week low. The period high is $42.15.
According to Reuters, "The cost of protecting General Electric Capital’s debt with credit default swaps rose to 348 basis points from 209 basis points on Friday, according to Markit Intraday. That means it now costs $348,000 a year to protect $10 million of GE Capital’s debt."
Take-Two Interactive (TTWO) could have taken an overly generous offer from Electronic Arts (ERTS). Instead, it held out for a higher price and hinted that it had other buyers.
The ERTS bid was worth $25.74. Take-Two changed hands at about $15 before the offer. Today its shares are off 28% to $15.75.
The board and management may want to find themselves outstanding attorneys.
Douglas A. McIntyre
Covering financial stocks this morning looks a bit like an assassination happening live on television. Futures are being pulled sharply lower by the financial stocks melting down. We are going to skip the individual news explanations as much of the trend now really boils down to just where these are opening up and trading at with the reduced financial models on Wall Street. S&P Futures are down over 44 points on last look. As you will see below, every major financial stock except one is gapping down:
Central banks in Europe said they were ready to put billions of dollars into the financial markets to ease the current credit crisis.
According to The New York Times, "The central bank said it was “ready to contribute to orderly conditions in the euro money market” and that it would lend as much cash as banks wanted at its benchmark interest rate of 4.25 percent."
When Merrill Lynch (MER) CEO John Thain signed the employment agreement that made him the S&P 500’s best-paid CEO of 2007, shares of Merrill were trading at more than $55 dollars per share. Now Merrill Lynch has agreed to sell itself to Bank of America ( BAC) for $25 per share — hardly an impressive saga of valuation in the less than 12 months that Thain was at the helm.
But here’s an interesting question: how much will Thain be paid for this romp? The insanely arcane 8-K, arcane even by 8-K standards, tells the story:
AIG (AIG) may lose over $20 billion for the trailing four quarters ending with the current period. It says the unprecedented credit crisis bought on by the failure of Lehman (LEH) requires it to ask outside investors and the Fed for $40 billion.
One plan would involve private equity firms. According to The Wall Street Journal Kohlberg Kravis Roberts & Co. and TPG offered to inject capital into AIG if the Fed agreed to provide the insurer with a bridge loan until its restructuring plan was completed.
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