The credit crisis is showing no signs of waning as Morgan Stanley reported disappointing quarterly earnings and Fifth Third Bancorp slashed its dividend and received a capital infusion on Wednesday. Investors pulled out of both stocks and the broader markets Wednesday, pushing the Dow down 80.60, or .66%, to 12,079.79 while the Nasdaq declined 20.90, or 0.82%, to 2,437.48.
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Shares of Morgan Stanley declined $1.92, or 4.83%, to $38.65 following its announcement of a 57% drop in second-quarter earnings as revenue fell $6.51 billion from $10.52 billion. Morgan Stanley, however, was able to boost its profit to $1.01 billion, or 95 cents per share, partly because of the sale of its Spanish wealth management unit and other assets. The New York-based investment bank blamed its revenue decline on the falling value of its mortgage securities and a drop in fixed-income trading attributed to bets against the energy sector, which has shown no signs of weakness.
Meanwhile, Ohio regional bank Fifth Third squashed investor confidence as it announced it would reduce its dividend by two-thirds and boost its reserves with a $2 billion capital infusion. The struggling regional bank's earnings have been devastated by its heavy investment in subprime mortgages, despite making some recent attempts to solidfy its balance sheet. Credit rating agency Fitch Ratings was so concerned it downgraded its credit rating on Fifth Third to A+ from AA-. Overall, Fifth Third [FITB] fell $1.93, or 15.16%, to $10.79 in Wednesday midday trading.
All wasn't gloom and doom on Wall Street as shares of healthcare management firm MEDdecision Inc. [MEDE] skyrocked $4.82, or 281.87%, to $6.53. The surge was attributed to insurer Health Care Service Corp.'s $121
million, or $7 a share, deal to acquire MEDdecision. The deal is expected to close late in the third quarter or
early in the fourth quarter of 2008, Wayne, Pa.-based
MEDecision said in a news release. - Gerald Magpily
