WaMu Blues
WaMu Blues
The Federal Deposit Insurance Corporation (FDIC) became the receiver of Seattle-based Washington Mutual, Inc. late Thursday. The move followed the closing of the bank by the Office of Thrift Supervision. In turn, the FDIC sold WaMu's $310 billion assets to J.P. Morgan Bank for $1.9 billion. The seizure and sale were of no surprise to investors or to many account holders; Rumors of WaMu's failure have been circulating for weeks. WaMu is the largest bank in U.S. history to fail. With an estimated $310 billion I assets, it easily trumped the $40 billion in assets held by Continental Illinois Bank and Trust when it failed in 1984.
Many analysts blame WaMu's vast issuance of the now infamous "interest only" loan for its down turn. The second largest lender of such loans saw its credit rating degrade and its shares fall by more than 95% over the last three quarters. However, J.P. Morgan Chase is considered well capitalized and its purchase of WaMu assets protects the FDIC from having to take on the responsibility of insuring account holders. As of Friday, WaMu branches, soon to be under a new banner, were open for business. Shares of J.P. Morgan Chase (JPM) finished the week at $48.24.
Research In Motion's Income Up 72% in Quarter Two
Waterloo, Ontario based Research In Motion, maker of the popular BlackBerry PDA, reported on Thursday that it's second quarter income jumped by more than 72%! Yet spirits were dampened by Friday when word reached investors that RIM anticipates that profits will be severely curtailed in the next quarter. The company blames increasing costs in research and development on new products for the drop.
RIM is preparing to release at least three new products before year's end. The BlackBerry Pearl Flip was announced in early September. Many technology reporters expect a new BlackBerry Bold and a completely new touch screen smart phone to be announced soon. Shares of RIM (RIMM) finished the week up at $70.76.
Flying High Again
Shareholders of both Delta Air Lines and Northwest Air lines voted to approve the merger of the two air carriers on Thursday. If approved by the United States Justice Department, the new company would be the world's largest commercial passenger airline service. The new company would retain the iconic Delta branding and the new corporate headquarters would be located at Delta's current location of Atlanta, Georgia. The deal would leave the new company with a fleet of 800 airplanes and a staff of 75,000 worldwide.
The companies plan on "down-sizing the over-hubbed Midwest region" by reducing service to Cincinnati, Detroit and Milwaukee and grounding older less efficient planes. Yet the deal has left some Northwest Union members feeling cold. While Northwest is well unionized, Delta is not. The merger would allow all employees to vote on whether or not to keep and expand the unions or do away with them altogether. Shares of Delta (DAL) and Northwest (NWA) closed at $7.95 and $9.80 respectively.
The Dow started the week at 11,388 and closed at 11,143. The NASDAQ began the week at 2,273 and finished at 2,183. The S&P 500 started at 1,255 and ended at 1,213.
Rates Reverse Course
Rates Reverse Course
Freddie Mac released its Primary Mortgage Market Survey for the week which showed that the 30-year fixed-rate mortgage (FRM) averaged 6.42%, up from last week when it averaged 5.35%. The 15-year FRM this week averaged 5.77%, up from last week when it averaged 5.54%. The rise in rates followed the rise in Treasury prices on the week. However, a raise in the rates may be seen as a negative at a time when home prices continue to fall. Rising rates could further deter would-be purchasers from financing a home loan.
"Mortgage rates followed Treasury bond yields higher this week amid market uncertainty over the current state of the economy," said Frank Nothaft, Freddie Mac vice president and chief economist. "Compared with last Thursday, 10-year Treasury yields are up about 0.3 percentage points, and 30-year fixed-rate loans moved up about the same amount. And while up, interest rates for 30-year FRMs are still more than 0.5 percentage points below this year's peak of 6.63 percent set the week of July 24th. The latest housing information for the third quarter continues to show some softness in prices and sales activity. House prices fell 5.3 percent over the twelve months ending in July - weaker than the market consensus - according to the Federal Housing Finance Agency's purchase-only house price index. During August, the median sales price of existing single-family homes (excluding condominiums and co-ops) fell 9.7 percent in August over August 2007, the largest 12-month drop since records began in 1968, according the National Association of Realtors (NAR). Overall resales dipped by 2.2 percent between July and August, on a seasonally-adjusted basis."
The 30-year loan rate started at 5.86% and finished at 5.99%. The 15-year loan began at 5.55% and finished at 5.66%. The money market fund began at 2.40% and finished at 2.42%. The $10,000 money market fund started at 2.68% and finished at 2.70%. The 1-year CD started at 3.67% and finished at 3.67%.
Stocks - FedEx Fuel Bill a Concern
Bonds - Treasury's Decrease on Announcement of Rescue Plan
Interest Rates - 30-Year (FRM) Falls for Fifth Straight Week
Stocks - Microsoft Takes Zune to the Next Level
Bonds - Poor Economy Raises Treasury Prices
Interest Rates - Rates Plunge May Help New Buyers
Stocks - Samsung Seeks SanDisk
Bonds - Treasuries Gain in Jobless Claims
Interest Rates - Short Week Slows Rates
Stocks - Comcast Caps Customers
Bonds - Treasuries in a Trough
Interest Rates - Interest Rates Continue Decline
Stocks - Dell's Profitable Future
Bonds - Bernanke in a Hole: Jackson Hole, WY
Interest Rates - Rates, As Well As Prices, Continue to Drop
