Wednesday, August 10, 2011

Today's Major Market Move - KBW Bank Index (U.S. Equity Index) Down 8.7% in Today's Session

Today was another big down day for global equity indexes and the U.S stock market in particular. The worst hit of the U.S. equity indexes we track was the KBW Bank index, which fell 8.7% in today's trading session. Of the top 15 worst performers today in the S&P 500, 7 of them are components of the KBW index (including the worst performer ZION, which was down 11%).

Click on the image for a larger view.
Click here to view the above table with the most recent data.

The bank stocks have suffered significantly more compared to the equity market in general. Here's a chart (y axis is in terms of % change) of the major U.S. equity indexes and the KBW Bank index.

Click on the image for a larger view.
Click here to view the above chart with the most recent data.

Bank of America has been in the news a lot lately with rumors circulating that the bank is in desperate need for capital. BAC continues to deal with losses from assets received as a result of the Countrywide acquisition and also faces the thread of a major payout from mortgage fraud litigation. At the behest of Bruce Berowitz (head of Fairholme funds which is BAC's largest shareholder) CEO Brian Moynihan held a conference call today with the bank's major investors. Presumably the intent was to reassure everyone that the bank was on solid footing and had a sound plan for dealing with current uncertainties. If that was in fact the intent, then the call would have to be considered a failure with BAC dropping almost 11% while the broader market was down a little under 5%. It's looking more and more that instead of BAC jumping into the water to save a drowning Countrywide, Countrywide is now pulling BAC under the water with it.

There is now another rumor floating around that BAC is considering selling off half its stake in China Construction Bank for around $9 billion. From Reuters:
The bank, the largest in the US by assets, is likely to sell half its stake in order to shore up its Tier 1 capital. Analysts believe Bank of America needs about $50 billion to meet new capital requirements.

Talks about the Chinese bank have been held with other investors in addition to the Kuwait Investment Authority and the Qatar Investment Authority, the sources said.

It is unclear if any agreement with the sovereign wealth funds or other investors have been cemented.

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