Another day with plenty of cross-currents. The bottom line is that a $5 spike in oil right near the close of trading in oil (2:30 pm ET) dropped stocks, the Dow lost all of its 120-point rally, though it came back a bit toward the close.
As that happened, traders again took the opportunity to sell into rallies on financials.
Also, retailers were weak, even though Wal-Mart raised estimates, outside of discounters sales were not great, and there is no belief better times are coming.
Finally, Fannie/Freddie were weak again. Why did Fannie Maeand Freddie Macdrop again today, even though everyone talked about their importance and Senator Schumer said bond holders might get a "lifeline?" Because, as one trader noted, the explicit backing likely won't come from the government until both companies exhaust every source of private fund raising they can muster in the upcoming months. That means more dilution for equity holders and the possibility that shareholder equity could be wiped out completely. A broader philosophical question is what an explicit backing would mean: most traders think it means we will have officially nationalized most mortgage financing in this country.
Elsewhere, Wachoviagot a first class CEO, Robert Steel, but the stock was down 9 percent nonetheless: 1) they reported a Q2 loss of $1.23-1.33--worse than expected, 2) on the conference call, management acknowledged the Golden West deal was a "mistake;" and 3) continuing concern about capital raises or dividend cut--dividend yield is currently 11%.
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