CNBC'S Bob Pisani reports on what traders were telling him at the close.
Mortgage issues returned to the markets this afternoon. July ending on the lows. Markets weakened right at 1:30 PM ET as indications flashed at the NYSE that American Home Mortgage would reopen after a day and a half, going from roughly $10 to $-1-$2. It closed at $1.04
Very clear pattern now: 1) bears will attempt to sell into every rally, as they did today. First attempt at 10 ET was unsuccessful, second right after AHM news was; 2) on days when there is no news concerning mortgages/credit issues, markets hold up fairly well.
For the month: Dow Industrials down 1.5%, S&P down 3.2% (worst since July 04), NASDAQ down 2.2% (worst since July 06), Russell 2000 down 6.9% (worst since Sept. 02), Midcap Index 4.4%, Bank Index down 6.9%, Brokerage Index down 9.1%, Home building Index down 12.4%, REIT Index down 8.3%
Earlier, Pisani talked about the reminders that mortgage problems won't simply disappear.
The market has seen another dip (the second today) after mortgage lender American Home Mortgage reopened after being closed for a day and a half. It reopened down 86%. They have been hit with margins calls from lenders. That has impaired their ability to issue new loans and fund existing commitments. They had taken major writedowns on the values of the loans they hold. The company also said it was delaying payment on its dividend.
Other mortgage REITs are weak as well.
A similar problem with Radian and MGIC. They have a joint investment in a company, C-Bass, which securitizes home loans--there have been margin calls from investors, which has impaired their ability to issue new loans. It's not clear if the entire investment is lost. Both companies have contributed a little more than $400 million each. Radian down 16%, MGIC down 13%.
These are reminders that mortgage problems are not going away. Good news is that market has taken two attempts to sell off and is still up. Advancing stocks outnumber declining stocks two to one.
At midday, Pisani was saying:
Reasons to be optimistic - Part Two
1) As anticipated, there was a concerted attempt to sell into the morning rally. Volume rose on the selloff, but it was largely unsuccessful. Bears attacked on the weakest link: brokerage stocks, which came down fast, but recovered more than half the losses within a half hour.