The markets had to contend with a raft of negative news, much of it centered around the consumer. Late in the day, Moody's said they may downgrade the debt of American Express; Moody's say they were concerned about AmEx's lending exposure to areas of the country that have experienced sharp home price declines. AmEx dropped 5 percent.
At the same time, consumer credit for June--a lagging indicator and not normally a market mover--came out much higher than expected--$14.3 billion vs. $6.3 billion estimate. May's reading was revised upward as well, from $7.8 billion to $8.1 billion. This statistic is very volatile and often revised heavily. Simply put, consumers are charging more on their credit cards.
Add in the weakness in retail sales, the disappointing weekly jobless claims report, and AIG--as well as a 360-point gain in the Dow in the prior two days--and you have all you need for a down day.
Financials were weak across the board, in fact they were far and away the weakest group; not just property and casualty firms on the AIG news, but also brokers like Lehman, Merrill and Goldman were weak.
Freddie Macclosed near its old low of $5.26; Fannie Mae reports tomorrow.
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