Market Snapshot: U.S. stocks fall with financial jitters back in play

By Daniel | August 21, 2008

Stocks fall as financial jitters return

Oil surges as dollar dips, tensions rise over Russia’s presence in Georgia

By Nick Godt, MarketWatch

Last Update: 8/21/2008 12:49:00 PM

NEW YORK (MarketWatch) — U.S. stocks were firmly lower on Thursday as
nervousness about distress at mortgage-giants Fannie Mae and Freddie Mac returned
to the fore and fresh concerns emerged about investment firm Lehman Brothers.

A surge in crude-oil prices lifted the energy sector, providing some support for
the major stock indexes but keeping consumer-related stocks under pressure.

“U.S. equities have rebounded from lows again though they remain anchored by
crude oil holding above $121,” analysts at Action Economics said.

The Dow Jones Industrial Average ($INDU) was down 49 points, or 0.4%, to 11,368,
with 25 of its 30 components trading lower.

Jitters about the credit crisis have returned to haunt the market this week, amid
expectations that the government may bail out Fannie Mae (FNM) and Freddie Mac
(FRE).

Even as the firms’ shares rebounded, the broader market kept a nervous tone.

“Talk about Freddie and Fannie nationalization has helped keep mortgage spreads
wide and illiquid, which together with a renewed decline in the dollar and a
parallel rebound in commodities supports a defensive tone in equities,” said Lena
Komileva, an economist at Tullett Prebon.

Among Dow components, oil giants Chevron (CVX) and ExxonMobil (XOM) both gained
more than 2%, as oil surged nearly 5% amid rising tensions over Russia’s military
conflict with Georgia.

But the Dow’s financial components again led the way down, with AIG (AIG) off
5.4%, Citigroup (C) off 1.3%, Bank of America (BAC) down 1.4% and J.P. Morgan
Chase (JPM) down 2.3%.

Shares of Lehman Brothers (LEH) also came under pressure after several media
reports and an analyst note. The stock was recently off 4.9%.

The Financial Times reported that the firm held secret talks earlier this month
to sell as much as half of its shares to South Korean or Chinese parties but
failed to reach agreement with either.

Separately, The Wall Street Journal reported the Federal Reserve had investigated
a rumor that Credit Suisse (CS) pulled a credit line from Lehman. The newspaper
said the Fed was told by the Swiss bank that the rumor was false.

And Citibank lowered its third-quarter earnings estimates for Lehman, along with
those for Goldman Sachs (GS) and Morgan Stanley (MS), citing asset write-downs,
weaker client flows and seasonal slowdown.

The S&P 500 index ($SPX) dipped 3.8 points to 1,270, while the Nasdaq Composite
(COMP) lost 21 points to 2,367.

Trading volumes showed 1.1 billion shares exchanging hands on the New York Stock
Exchange and 1.9 billion trading on the Nasdaq stock market. Declining issues
topped gainers by 2 to 1 on both the NYSE and the Nasdaq.

By sector, financials fell the most, off 1.6%, followed by consumer staples and
information technology, both down 1%.

Results from fiber-optic equipment maker JDS Uniphase (JDSU) and Salesforce.com
(CRM) fell short of forecasts, sending both of the firms’ shares down by more
than 13%.

But the energy sector helped support the market, with oil surging nearly 5%.

Oil surges

With nervousness about financials putting pressure on the dollar, the dollar
index ($DXY) — which measures the U.S. unit against a basket of major currencies
– fell 1%.

Did you like this? If so, please bookmark it,

$\\$