Tuesday, 29 July 2008

Another stock market tumble, another big writedown

The recent rebound in the US stock market has lost its momentum after another big drop yesterday. Bloomberg reports:

U.S. stocks fell and the Dow Jones Industrial Average lost more than 200 points for the second time in three days after the International Monetary Fund said there is no end in sight to the housing slump.

The Standard & Poor's 500 Index retreated 23.39 points, or 1.9 percent, to 1,234.37, its lowest level since reaching an almost three-year low on July 15. The Dow lost 239.61, or 2.1 percent, to 11,131.08. The Nasdaq Composite Index slipped 46.31, or 2 percent, to 2,264.22. Four stocks fell for each that rose on the New York Stock Exchange.

Investor sentiment is clearly fragile, and Merrill Lynch's announcement of further writedowns yesterday shows why. From Bloomberg:

Merrill Lynch & Co. took steps to shore up its endangered credit rating by selling $8.5 billion of stock and liquidating $30.6 billion of money-losing assets at a fifth of their original value.

Temasek Holdings, the Singaporean government investment fund that bought shares in Merrill last December to become the firm's biggest investor, will buy $3.4 billion of stock in the new offering, New York-based Merrill said today in a statement. Merrill will book a $2.5 billion expense related to the transaction as well as $5.7 billion of additional writedowns on collateralized debt obligations and associated hedges.

No comments:

Post a comment