Several interesting stories came out today to round out a turbulent week:
Concern over future writedowns: Financial stocks took a big hit Thursday and Friday based on fears that financials with exposure to risky credit securities will have to further write down their investments. While many banks reported dissapointing results for their latest quarter, these results did not incorporate the most recent deterioration of the credit markets. Merrill Lynch and Credit Suisse were among the first banks to announce results which took September into account; their weak results rekindled the fears of investors. Chuck Prince, CEO of Citigroup is expected to resign this Sunday, over concerns that troubles with the firms risky credit SIV funds (see below) will force the firm to sell assets. He will follow Stan O'Neal as the second CEO of a major bank to be fired as a result of the turmoil in the credit markets.
WSJ Article
Payroll data: Non-farm payrolls rose 166,000 in October, led by strong gains in services. The unemployment rate was unchanged at 4.7%. The data suggests that contagion to the real economy from recent turmoil in the real estate and financial markets may be contained. It assuages fears of an upcoming recession, and suggests that further Fed rate cuts are unlikely in the near term.
Sketchy deals at Merrill Lynch: Merrill engaged in deals with hedge funds that may have been designed to delay recognition of losses from mortgage securities. The SEC is likely to investigate. Merrill shares tumbled more than 9%. Rumours circulated that Bank of America may consider bidding for the troubled giant in a bid to boost its own weak Invesment Banking operations.
News courtesy of WSJ.com and FT.com
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