Dow Sluggish After Morning Jump
- Nov 10, 2008
After a morning up, the Dow Jones index ended the day down 73.27 points, or 0.82 percent, with the S&P 500 and the Nasdaq a bit down as well (1.27 percent and 1.86 percent, respectively). It could be that the initial enthusiasm investors showed in other parts of the world for the Chinese stimulus plan had worn off by the time U.S. markets were open very long. Part of the downward movement in the market today also involved Goldman Sachs shares, which were down about 8.7 percent seemingly on rumors that the company is planning a new secondary equity offering, only six weeks after its most recent offering.Mortgage finance giant Fannie Mae, one of the early stars of the Panic of 2008, is back in the financial limelight today, and not for good reasons. The firm is reporting a loss of $29 billion for its most recent fiscal quarter. Much of that total was due to a $21 billion charge involving how the firm accounts for tax credits on its books–tax credits that Fannie Mae doesn’t ever expect to use, since it isn’t making enough money to do so. The losses mean that Fannie Mae will likely need to draw on the $100 billion in federal money made available to it in September, which it hasn’t needed yet. “This action was necessary to maintain the stability of our financial system,” Neel Kashkari, who for the moment heads TARP, the U.S. Treasury’s bailout program, said today at a Securities Industry and Financial Markets Association conference in New York, reported Bloomberg. (No word on whether Kashkari added “such as it is” to that sentence.) The action he was referring to was the re-do bailout of AIG, which is fetching the taxpayer $40 billion worth of preferred shares in the company. Stockholm-based D. Carnegie & Co. AB, Sweden’s largest investment bank, has been seized by the Swedish government and will be sold off piece by piece. The bank’s stock has lost 87 percent of its value in the last year, and was accused by the government of taking “exceptional risks” with loans. It’s an all too familiar story, with a Scandinavian setting. Electronics retailer Circuit City has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court in its hometown of Richmond, Va. The chain’s decision to file comes at an unusual time for such retailer filings–just at the beginning of the Christmas shopping season. But then again, holiday shopping isn’t likely to give any beleaguered retailer even a modest bit of relief this year. Circuit City has not only been pummeled by hard times in the wider economy and competition from Best Buy and Wal Mart, but also its ill-advised decision a few years back to fire a lot of better-paid shop-floor employees and replace them with cheaper ones. Oops, those higher paid employees had been spending their time driving sales. Circuit City joins a long line of retailer casualties of 2008. Other retailer bankruptcies this year include Goody’s Family Clothing, Lillian Vernon Corp., Linens ‘n Things, Mervyn’s, Mrs. Fields’ Original Cookies Inc., Sharper Image Corp., Steve & Barry’s, and Value City Department Stores. On a more positive retail note, McDonald’s Corp. has reported that its global same-store sales rose an impressive 8.2 percent in October. In the United States, its growth has been 5.3 percent. What gives? The Oak Brook, Ill.-based fast-food giant serves cheap food, of course, but there may be more to it that that. It’s long been noted that during hard times, vice does well, as people turn to immediate pleasures to allay their worries about the future. Strictly speaking, a Big Mac, side of fries and a Coke don’t count as vice, but healthy-eating fanatics have been trying to pour shame on the purveyors and consumers of such victuals for years.