Tuesday, September 16, 2008
World Wide Crash
Monday was a shocker. The Dow lost a massive 504.48 points, or 4.42 percent, to close the session at 10,917.51. The SPX declined 59.00 points, or 4.71 percent, to close at 1,192.70. We have no position on and just watched from the sidelines.
Monday saw the largest one day decline for the major market indices since the 9/11 attacks seven years ago. The fall came following the failure of Lehman Brothers to find a buyer, causing the financial company to file for bankruptcy. This marks an end of the 158-year old company, which has survived a number of economic problems, but couldn’t make it through the credit crunch of 2008. Once again, the feeling that large blue-chip stocks cannot fail was proven wrong, showing just how important it is to be diversified and limit risk.
AIG (AIG) shares fell more than 60 percent on concerns its solvency was being tested. The company is looking for emergency loans from the Fed to raise the capital needed to stay afloat. The insurance giant got good news later in the day when New York’s governor said it would borrow the firm $20 billion. The fear is that the company’s credit worthiness will be lowered and that this will make it even more expensive and difficult for AIG got get financing. AIG shares closed the session at $4.76. Its 52-week high was $70.13.
In another huge news announcement, Merrill Lynch (MER) confirmed that it reached a deal with Bank of America (BAC) to be taken over for $50 billion in stock. However, because the deal is a stock swap, Merrill’s early gains faded and the stock close flat on the session at $17.06. BAC shares fell 21.31 percent on the session to a price of $26.55. The deal has BAC giving 0.8595 shares for every share of LEH, valuing LEH at $22.82 as of Monday’s closing price for BAC.
Today’s historic series of events overshadowed a sharp decline in crude prices. Oil fell below $100, dropping $5.47 a barrel to $95.71. Crude prices have been falling on worries about a slowing economy and today’s news not only supports this view, but now leaves traders seriously concerned about a recession. In fact, the Fed fund futures are now pricing in a rate cut at today’s Fed meeting!!
What was key from my view was that the major market indices yesterday fell below key support levels: 11,000 for the Dow and 1200 on the SPX. And this decline occurred on strong volume. It will be interesting to see if traders continue to sell shares or if the bulls step in and buy the dips. I know we trade the SPX but I follow the Dow carefully now on the technical side. If the Dow doesn't reclaim the 11,000 support level then I reckon there are more losses to come.
We have a Fed meeting today; lets see what words of comfort they can dish out!!
Until next time.
Monday saw the largest one day decline for the major market indices since the 9/11 attacks seven years ago. The fall came following the failure of Lehman Brothers to find a buyer, causing the financial company to file for bankruptcy. This marks an end of the 158-year old company, which has survived a number of economic problems, but couldn’t make it through the credit crunch of 2008. Once again, the feeling that large blue-chip stocks cannot fail was proven wrong, showing just how important it is to be diversified and limit risk.
AIG (AIG) shares fell more than 60 percent on concerns its solvency was being tested. The company is looking for emergency loans from the Fed to raise the capital needed to stay afloat. The insurance giant got good news later in the day when New York’s governor said it would borrow the firm $20 billion. The fear is that the company’s credit worthiness will be lowered and that this will make it even more expensive and difficult for AIG got get financing. AIG shares closed the session at $4.76. Its 52-week high was $70.13.
In another huge news announcement, Merrill Lynch (MER) confirmed that it reached a deal with Bank of America (BAC) to be taken over for $50 billion in stock. However, because the deal is a stock swap, Merrill’s early gains faded and the stock close flat on the session at $17.06. BAC shares fell 21.31 percent on the session to a price of $26.55. The deal has BAC giving 0.8595 shares for every share of LEH, valuing LEH at $22.82 as of Monday’s closing price for BAC.
Today’s historic series of events overshadowed a sharp decline in crude prices. Oil fell below $100, dropping $5.47 a barrel to $95.71. Crude prices have been falling on worries about a slowing economy and today’s news not only supports this view, but now leaves traders seriously concerned about a recession. In fact, the Fed fund futures are now pricing in a rate cut at today’s Fed meeting!!
What was key from my view was that the major market indices yesterday fell below key support levels: 11,000 for the Dow and 1200 on the SPX. And this decline occurred on strong volume. It will be interesting to see if traders continue to sell shares or if the bulls step in and buy the dips. I know we trade the SPX but I follow the Dow carefully now on the technical side. If the Dow doesn't reclaim the 11,000 support level then I reckon there are more losses to come.
We have a Fed meeting today; lets see what words of comfort they can dish out!!
Until next time.
# posted by Paul @ 3:49 AM 
