Fannie, Fed chief and more earnings data to drive stocks
NEW YORK _ The bears have Wall Street cornered and they won't let go. The coming week is almost sure to be a rocky ride for the US stock market as investors fret about the stability of Fannie Mae and Freddie Mac, the government-sponsored home finance companies. Barring any development that eases fears of capital constraints at Fannie and Freddie, analysts and money managers say US stocks are set to fall further into the bear market's arms.
Investors this week will focus on Federal Reserve chairman Ben Bernanke, who will give his semi-annual testimony tomorrow at the Senate Banking Committee, and on Wednesday before the House Financial Services Committee.
Investors will zero in on anything Mr Bernanke says about Fannie Mae and Freddie Mac, in addition to his take on the economy, inflation and interest rates.
''The bottom line is that we're in the middle of a financial tsunami. This is a storm the likes of which this country hasn't seen,'' said Peter Kenny, managing director of Knight Equity Markets in Jersey City, New Jersey. ''The market right now needs to see results. It no longer gives anyone the benefit of the doubt.''
Fannie Mae and Freddie Mac, which own or guarantee half of all US mortgages and package them into bonds, are confronted by mounting losses from delinquencies and foreclosures. Investors fear that if they are hampered from doing business, the paralysis will only make the housing crisis get worse.
The week also will be filled with quarterly earnings and economic indicators. It will be one of the busiest weeks for earnings, with reports due from Dow component Citigroup, and the technology bellwether Google, among others.
Making the terrain even more treacherous are concerns about oil's jump on Friday to a record above $147 a barrel and worries that this week's data on consumer and producer prices may show rising inflationary pressures.
Economic reports to watch include the producer and consumer price indices (PPI and CPI), industrial production and capacity utilisation, and housing starts. Economists polled by Reuters forecast that overall PPI will increase 1.3% in June, following May's gain of 1.4%. The forecast for overall June CPI is up 0.7%, compared with a 0.6% gain in May.
''The market is going to remain nervous, watching developments with oil and tensions in the Middle East, and the avalanche of earnings and outlooks that will really start to hit the tape with banks and tech companies,'' said Frederic ****son, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
US crude oil futures shot up more than 2% on Friday on geopolitical concerns over Iran's nuclear work and supply worries combined to lift prices.
On Wednesday, the Fed will release the minutes from its most recent meeting on June 24-25. At that meeting, the Fed held its benchmark rate at 2%.
Concerns about Fannie Mae and Freddie Mac's stability drove a sell-off on Friday that marked the sixth straight weekly drop for both the Nasdaq and the Standard & Poor's 500 Index _ their longest weekly losing streaks since 2004.
On the week, the Dow shed 1.7% to close on Friday at 11,100.54. The Nasdaq lost 0.3% for the week to 2,239.08 and the S&P dropped 1.9% to 1,239.49.
Fannie and Freddie are the twin pillars of the housing market, so their troubles put the US economy and its banking system at risk, according to analysts.
US Treasury Secretary Henry Paulson offered no hint of an imminent government bailout, saying on Friday his major aim was to back Fannie and Freddie ''in their current form''.
In addition to quarterly report cards from Citigroup and Google, earnings to watch this week include Intel Corp and Microsoft Corp. Quarterly numbers and companies' comments on what they expect for the rest of the year are likely to make stock trading extremely choppy throughout the week. REUTERS
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Fed, Treasury to Help Fannie Mae and Freddie Mac
PlusFed, Treasury to Help Fannie Mae and Freddie MacFed, Treasury to Help Fannie Mae and Freddie Mac The Associated Press The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have
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FDIC, Failed Bank List
On July 11, 2008, IndyMac Bank, F.S.B., Pasadena, CA was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Conservator. All non-brokered insured deposit accounts and substantially all of the assets of IndyMac Bank, F.S.B. have been transferred to IndyMac Federal Bank, F.S.B. (IndyMac Federal Bank), Pasadena, CA ("assuming institution") a newly chartered full-service FDIC-insured institution. No advance notice is given to the public when a financial institution is closed.
