Paltry news from the financial sector brought the bears out on Monday, Aug. 25 as Dow Jones Industrial Average tumbled 241.81 points to 11,386.25, reversing a significant gain at the close of last week.
The financials begin to emit negative energy before the weekend began as late Friday word surfaced that the FDIC seized Columbian Bank & Trust Co. of Topeka, Kansas. The bank is not publicly traded.
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The bad bank vibes continued to reverberate through the market Monday as Lehman Brothers Holdings Inc. skidded 6.66% to close at $13.45. The slide followed an Observer report of a planned coup from inside the investment bank to oust CEO Richard Fuld, and news that one of South Korea's top financial regulators, Jun Kwang-woo, cautioned Korea Development Bank in acquiring overseas banks due to rumors that KDB was considering acquiring Lehman.
Dark clouds also hovered over the insurance sector as American International Group Inc. fell 5.49% to close at $18.78 following a Credit Suisse analyst report forecasting a $6.5 billion third quarter loss for the insurer versus a previous estimate of a $2.6 billion. The analyst warned the AIG may have to raise an additional $13.3 billion following Fitch Ratings' warning of a possible credit rating downgrade.
Among deal stocks, Gilat Satellite Networks Ltd. was a big loser, dropping 7.29% to $8.01 on news that a private equity buying group said it will not close a deal at the agreed price of $11.40 per share, or $475 million. - Michael Rudnick
