Stocks opened lower Monday as Friday's euphoria cooled with investors realizing that financial woes could go on for quite some time and a fresh wave of new developments emerged.
The biggest news today is that Wall Street's remaining investment banks — Goldman Sachs and Morgan Stanley — will become commercial bank-holding companies instead of stand-alone investment banks. The two banks will now be able to create commercial banks, but will be subject to tighter regulation.
Goldman shares rose 4 percent and Morgan Stanley shot up 15 percent at the open.
In addition, Japan's largest bank, Mitsubishi UFJ Financial Group, said today that it plans to buy a 10 to 20 percent stakein Morgan Stanley.
Morgan Stanley had been in talks to merge with Wachovia but sources close to the deal say these latest developments put any such deal on the back burner — possibly forever.
Meanwhile, Japanese brokerage house Nomura Holdings reached a deal to buy the Asian operations of Lehman Brothers, . UK bank Barclays has already snapped up the core US business held by Lehman.
The New York Stock Exchange announced Monday plans to add 30 more stocks to the short-selling ban list, including CNBC parent General Electric , CIT Group , Legg Mason and American Express .
The short-selling ban didn't appear to help banks. Washington Mutual tumbled 20 percent, while Wachovia and Wells Fargo were off about 10 percent.
JPMorgan also shed about 10 percent.
The Bush administration and Congress stepped up talks on a $700 billion-plus bailout plan, which will give the Treasury powers to buy toxic assets. Congressional Democrats want to add provisions to include aid for homeowners. The plan could ultimately wind up costing $1.8 trillion.
There was also an increasing realization that, despite the government bailout, there's more pain to come.
"It will have an impact on what is happening in the markets, but eventually it will not stop banks from realizing their losses," Marino Valensise, CIO of Barings, told "Worldwide Exchange," adding that they would have to sell assets at discounted prices.
While the financials continued to flail, a trio of cash-rich firms -- Microsoft , Hewlett-Packard and Nike -- launched stock buybacks and dividend increases.
Investors will be watching other cash-saturated companies such as Apple , Google and Research In Motion to see if they are willing to share the love, too.
THE WEEK AHEAD:
MONDAY: Fed's Fisher speaks
TUESDAY: Richmond Fed manuf. report; Earnings from Lennar
WEDNESDAY: Bank Reserve Settlement; Fed's Bernanke and Lacker speak; weekly mortgage applications; existing-home sales; weekly oil inventories; Earnings from Bed, Bath & Beyond and Nike
THURSDAY: Paulson testifies; Chicago, Dallas Fed presidents speak; jobless claims; durable goods; new home sales; natural-gas inventories; Kansas City Fed manuf. report; Earnings from Discover, Rite Aid and Research In Motion
FRIDAY: St. Louis Fed pres. speaks; Last look at Q2 GDP, corporate profits; consumer sentiment; Earnings from KBHome
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