Russell opens lower after Monday's wreckage
After the worst one day point drop since the terrorist attacks of Sept. 11, small caps are lower this morning, as AIG’s (NYSE:AIG) fate remained uncertain and as investors surveyed the wreckage from Monday’s session.
At 9:45 a.m. ET, the Russell 2000 (NYSE:IWM) had fallen 5.85, or 0.85%, to 683.91.
Following one of the most cataclysmic days Wall Street has seen, investors’ focus has shifted to AIG from Merrill Lynch’s emergency sale to Bank of America (NYSE:BAC) and Lehman’s (NYSE:LEH) declaration of bankruptcy on Monday. The insurance juggernaut, which saw its stock plummet 61% on Monday on liquidity concerns, was forced to scramble to raise $14.5 billion overnight to cover obligations in the wake of fresh rating agency credit downgrades. The firm is seeking to raise $75 billion. Shares plunged 42%.
Just one day after Lehman Brothers declared bankruptcy, English bank Barclays’ interest has reemerged in the washed up bank’s core investment banking unit. Barclays, which initially walked away from a takeover deal over the weekend, has been looking to increase its exposure in the U.S. market.
In an effort to inject liquidity back into the markets, the Federal Reserve pumped $50 billion into the system. This is on top of the $20 billion the Federal Reserve Bank of New York was already slated to infuse the system with.
The Federal Reserve will meet today for a policy meeting, as the credit crisis has reached a climax. The central bank is expected to leave rates on hold, despite the market’s cries for a quarter point rate cut. The policy decision is expected at 2:15 p.m. ET.
In economic news, the Labor Department reported before the opening that the consumer price index for the month of August edged down 0.1%, which was in line with the forecast. This compared with an uptick of 0.8% in July. It was the first time in two years the index has declined, as a softer economy exerted downward pressure on demand for energy. Excluding food and energy, though, the CPI index was actually up 0.2%, also in line with the consensus.
Oil continues its downward assent this morning, falling another $5 to $90 a barrel, as the market sees energy demand softening in the face of a weaker economy. Today’s sell off follows a $5 drop on Monday.
In large-cap headlines, Goldman Sachs (NYSE:GS) reported third-quarter earnings this morning that plummeted 70% from a year ago, as the financial turmoil pressured results. One of the other few investment banks left standing, Morgan Stanley (NYSE:MS), is expected to post earnings on Wednesday. The market is looking for clues from both entities that separate them from Lehman.
Computer maker Dell Inc. (Nasdaq:DELL) said it sees global demand for technology weakening further.
In broader industry groups, airlines are the only industry group in the green this morning, while full-line insurance, coal and renewable energy equipment are among those leading the market lower.
In small-cap headlines, marine transportation and service company American Commercial Lines Inc. (Nasdaq:ACLI) this morning issued a third-quarter earnings estimate above the consensus on Wall Street and said that it will have enough insurance to cover the cost of cleanup for an oil spill on July 23. Shares gained 7%.
Medical device company Datascope Corp. (Nasdaq:DSCP) said this morning that it will be acquired by medical technology company Getinge AB for $53.00 per share. Shares gained 5%.
Lawson Software (Nasdaq:LWSN) said this morning that it expects to report weaker-than-forecasted results for its fiscal first quarter, as a slower economy has begun to weigh on sales. Shares slipped 7%.
