Wall Street and exchange traded funds (ETFs) opened for trading this morning, and the Dow Jones Industrial Average promptly lost 700 points. Since then, the major indexes have been fluctuating.
A loss of confidence in the world’s financial system and frozen credit markets have led to a 21% loss for the Dow in just 10 days, reports Tim Paradis for the Associated Press. Today’s gyrations might have been caused by computer-driven “buy” orders, which kicked in when prices fell enough to make certain stocks look attractive.
Other news this morning may be contributing in one way or another to the fluctuations of the market, including:
- Wells Fargo (WFC) is going ahead with plans to buy Wachovia (WB) after Citigroup (C) broke off talks. Citigroup plans to seek $60 billion for breach of contract, reports Sara Lepro for the Associated Press. The deal is expected to be complete by the end of the fourth quarter. Both Wells Fargo and Wachovia are major holdings in the Regional Bank HOLDRs (RKH), with Wells at 13.9% and Wachovia at 6.5%. RKH is down 37.6% year-to-date.
- Moody’s placed a negative outlook on the long-term rating of Goldman Sachs (GS), says the Associated Press. Goldman Sachs switched its status to a bank holding company recently, a change that was sparked by concerns that standalone investment banks may no longer be considered viable operations in the current credit markets. Despite the worsened outlook, Moody’s said that the long-term ratings “remain anchored on superior performance, proven risk management discipline, the reduction of leverage, a conservative liquidity profile, as well as a level of systemic support that is factored into the rating.”
- American International Group (AIG) has borrowed $70.3 billion so far under a U.S. government bailout loan, according to a report in the Wall Street Journal. The government said originally that it would loan AIG $85 billion, but upped that to $122.8 billion this week. The bulk of the original loan went toward providing collateral to AIG’s trading partners on credit default swaps and to cover losses in securities lending, report Savio D’Souza for Reuters.
- The U.S. trade deficit fell slightly in August on a drop in foreign oil, reports Martin Crutsinger for the Associated Press. U.S. exports totaled $164.7 billion, down 2% from July. While exports have kept economic growth positive, many economist feel that the turbulence on Wall Street all but guarantees a recession for the United States.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.