A quarter-point cut in the Fed Funds rate may not be enough for themarkets. Those calling for more aggressive action clearly have seized some of the rhetorical high ground recently. The concern today is that the markets are vulnerable to profit-taking after a considerable 45-point advance in the S&P 500 in the last five days.
One problem is that recent rallies have been strongest in the most beaten up groups (banks, builders), suggesting short covering has been a major factor.
Throwing in the towel. Analysts seem stunned by the size of Washington Mutual's problems; they're not just cutting estimates; some seem to be giving up on 2008 profits.
Merrill Lynch's headline tells the tale: "Big bath unlikely to resolve investors' concerns."
Other analyst comments on Washington Mutual:
Fox Pitt: "Conversations with the company lead us to believe that the subprime and home equity books of business continue to deteriorate at an alarming rate and the company is beginning to see deterioration in its "prime" books of business, as well."
Citigroup: "WM's desperate measures, incl. dilutive capital and mortgage restructuring, reflect a poorly managed business & excessive exposure to subprime & 2nd lien Home Equity."
Friedman Billings Ramsey: "This will not be the first nor last recapitalization for mortgage related stocks."
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