Financials Attempt to Buoy Stocks
Dow -57.75 at 6569.19, Nasdaq -13.27 at 1280.58, S&P -2.32 at 681.06
[BRIEFING.COM] Stocks began the session with widespread losses, mirroring the declines registered in overseas markets.
Early weakness largely hinged on continued concerns about the global financial system. Japan's top lenders, Mitsubishi UFJ Financial (MTU 3.76, -0.29) and Mizuho Financial (MFG 3.38, -0.10) both showed weakness in the week's first trading session. Meanwhile, Britain's Lloyds (LYG 2.39, +0.04) tumbled on foreign exchanges after the bank devised plans to insure assets by giving the government up to 77% of the company. HSBC (HBC 24.11, -1.39) sank ahead of its previously announced rights offering.
U.S. traders sent the financial sector more than 2% lower in the first few minutes of trading. News that Capital One Financial (COF 8.83, +0.52) is opting to slash its dividend did little to bolster confidence in the sector. The company plans to pay a quarterly dividend of $0.05 per share, down from $0.375 per share.
With financials leading the broader market lower, it appeared stocks would test the multiyear lows set in the prior session. However, financials rebounded and helped the broader market pare its losses. Financial stocks are now up 3.7% as diversified banks (+15.5%) and other financial services companies (+7.0%) provide leadership.
Though financials are holding on to their gains, the major indices have fallen back under renewed selling pressure.
Investors were given a little bit of hope that the problems plaguing financial stocks will soon be more directly addressed when Reuters reported the Treasury will unveil in coming weeks further details regarding its plan to handle toxic assets.
The broader market is showing little reaction to news that Merck (MRK 20.42, -2.32) and Schering-Plough (SGP 20.20, +2.57) are merging in a cash and stock valued at $41.1 billion. Schering-Plough shareholders will receive 0.5767 shares of MRK and $10.50 in cash for each share of SGP. Based on MRK's closing price last week, SGP is being priced at $23.61 per share. Merck also reaffirmed an in-line earnings outlook for 2009.
The announcement comes not long after Pfizer (PFE 12.61, -0.12) announced it will acquire Wyeth (WYE 40.72, -0.11) for nearly $68 billion in cash and stock. News of further consolidation in the health care sector, which is the largest in the S&P 500 by market weight, is providing little support to health care stocks (-1.1%) and the broader market.
Billionaire and famed value investor Warren Buffett did little to instill confidence that economic and market conditions will make a quick turnaround during a CNBC interview, though he remains confident in the long-term potential of the U.S.
