Copyright 2008 MarketWatch.com Inc.All Rights Reserved
MarketWatch
November 10, 2008 Monday 4:20 PM EST
SECTION: NEWS & COMMENTARY; Markets; Financial Stocks
LENGTH: 625 words
HEADLINE: Sector closes lower after AIG, Fannie Mae report losses
BYLINE: John Spence, MarketWatch mailto:jspence@marketwatch.com. John Spence is a reporter for MarketWatch in Boston.
BOSTON (MarketWatch) -- Shares of American International Group Inc. rose 8% on Monday on news the troubled insurance company received additional help from the government, but the broad financial sector got off to a rocky start this week.The Federal Reserve and the U.S. Treasury have used their new powers to restructure support for AIG, which had already received an emergency bridge loan from the government to help it whether the credit storm. The new plan will see the Treasury invest $40 billion in preferred shares of AIG (AIG) and the Fed create two new lending facilities to help AIG remove toxic assets from its balance sheet.AIG also reported a third-quarter loss of nearly $25 billion.In other earnings news, Fannie Mae (FNM) , the mortgage giant placed in conservatorship by the government, on Monday reported a record third-quarter loss of $29 billion. The firm continued to book big charges on mortgage-related assets as the housing market unwinds.One notable decliner Monday in the financial sector was Goldman Sachs Group Inc. (GS) , which was down for the fourth straight session. The stock closed down more than 8% on analyst talk the company may need to raise additional capital.Another firm hit by the credit crunch, Citigroup Inc. (C) , is in discussions to acquire an unnamed U.S. regional bank, The Wall Street Journal reported. Buying a bank could help restore morale after Citi tried to buy Wachovia Corp. (WB) , but lost the deal to Wells Fargo & Co. (WFC) .In analyst ratings actions, Credit Suisse analysts on Monday upgraded shares of Wells Fargo to outperform from neutral, but cut their price target on the stock to $38 from $40.After raising $11 billion through issuing common stock last week and capital injections from the government, Wells Fargo "has substantially improved its balance-sheet flexibility and potential earnings power to navigate a more severe economic downturn," Credit Suisse said in a note to clients.The analysts wrote Wells Fargo, which is in a deal to acquire Wachovia's banking operations, has earnings diversity and more balance-sheet flexibility that favorably positions the company to produce "meaningful upside earnings surprise" in 2009 and 2010 "even against the backdrop of a worsening economic environment."Shares of private-equity giant Blackstone Group (BX) rose slightly despite a negative report from Barron's over the weekend. The company may be inflating the value of its private-equity and real estate investments, the story said.An exchange-traded fund following large-cap financial stocks, Financial Select Sector SPDR (XLF) , lost 3% for the session. The SPDR KBW Bank ETF (KBE) was also off about 4%.American Capital Ltd. (ACAS) was among the sector's big decliners and the stock shed more than 40% after the company suspended its dividend and reported a third-quarter loss. Allied Capital Corp. (ALD) shares were also down over 40% after the firm said its third-quarter loss widened to $318 million.The financial sector is expected to endure more job cuts as Wall Street banks scramble to reduce costs as a result of further market turmoil and economic worries.Companies in the U.S. may cut as many as 70,000 jobs, adding to the estimated 150,000 jobs already lost by the global financial industry, the Financial Times reported Monday. The losses are expected to be concentrated in investment banking and trading, according to the article.Among asset-manager stocks, Janus Capital Group Inc. (JNS) fell sharply, losing more than 15%. The Denver-based company is one of many mutual-fund families to recently announce job cuts amid a difficult market.©1997-2002 MarketWatch.com, Inc. All rights reserved. See details at http://custom.marketwatch.com/custom/docs/useragreement.asp.
LOAD-DATE: November 11, 2008
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