Financials Lead Stock Market Lower

Posted by Patrick O'Connor on 7/28/08 12:13 pm

On Wednesday, the House approved sweeping legislation designed to help the housing market, including support for Fannie Mae and Freddie Mac to help homeowners refinance mortgages, and a tax credit for first time homebuyers.  On Saturday, the Senate overwhelmingly passed this legislation, hoping to calm financial markets after two national banks had failed the day before. 

See WSJ Mortgage Coverage.

But the market was still clearly concerned on Monday, and financial stocks led the market lower as a result.  Even Fannie Mae and Freddie Mac were down.  Merrill Lynch’s stock was particularly weak, down 11.59%, but for unknown reasons during market hours.  After the close, though, Merrill announced that it will writedown another $5.7 billion and raise $8.5 billion by selling new common shares.

The IMF said today that financial institutions face a second wave of losses on loans other than subprime.

IMF also said the end of the housing slump is not in sight.

Federal Reserve Bank of Minneapolis President Gary Stern says credit crunch likely to last “many months.”

Banks are lending less to businesses.

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