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Published March 12, 2008 at 5:43 PM
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The Dow Jones Industrial Average after skyrocketing over 416 points on Tuesday -- its biggest gain in five years -- fell 46.57 points Wednesday to close at 12,110.24. Tuesday's bullish investing was sparked by the Federal Reserve's plan to help ease credit worries by lending up to $200 billion in Treasury securities to primary dealers for a 28-day term in exchange for triple-A-rated mortgage-backed securities. The Street's optimism was quelled Wednesday as concerns over the future of the weakening housing market loom.
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- Some deal stocks with direct ties to the mortgage market that got a much needed boost Tuesday were deflated Wednesday as market optimism turned. One notable example is Countrywide Financial Corp., which rose over 17% Tuesday only to fall 7.05% Wednesday to close at $4.75 per share. It looks as if the Fed-induced high did not erase investors' memories of The Wall Street Journal reports this week of the FBI's investigation of the lender to examine misrepresentation of its financial condition and whether it deliberately issued loans to borrowers that did not have the assets or financial wherewithal to pay them back. Bank of America Corp. spokesman Scott Silvestri told Bloomberg Tuesday that its roughly $4 billion Countrywide acquisition is on schedule.
- Radio broadcaster Cumulus Media Inc. slid 8.58% Wednesday to close at $4.90 per share. The spread on its pending $11.75 per share acquisition by CEO Lew Dickey and Merrill Lynch Capital Corp. continued to widen despite news it was in talks last week with its lenders to amend the change-of-control provisions of its credit agreement, which should indicate that the deal is moving forward.
- Ocwen Financial Corp. saw one of the steepest drops among deal stocks, tumbling 18.44% to close at $4.82 per share. The loan-servicing company said late Tuesday that due to a failure to agree on terms it ended talks with a group led by its CEO William Erbey, Oaktree Capital Management LP and Angelo, Gordon & Co. for a $7 per share acquisition.
- Michael Rudnick
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