Tuesday February 10, 2009
Navivest

The stock market took a beating today, on Wall Street concerns that the Obama administration’s Financial Stability Plan, details of which Treasury secretary Tim Geithner released today, will not be enough to fix the financial crisis.

While Wall Street expressed concern that the plan was light on details, from which we are to infer that that was the reason for the sell off in stocks today, the real truth might be that Wall Street is worried the government might not be willing to put up the cash to save every troubled big bank and will instead allow some to go under.

In the announcement, the Treasury revealed that the government will be putting banks through a “comprehensive stress test.” This probably raises worries that those banks that are deemed to be beyond saving, as revealed by the stress test, will be allowed to fail.

Upon the release of the plan, the Dow Jones Industrial Average, which opened at 8269.36, ended the day at 7888.88, for a loss of 381.99 or 4.62%. The NASDAQ lost 66.83 points or 4.19% to close at 1524.73, while the S&P 500 lost 42.73 points to close at 827.16, for a loss on the day of 4.91%.

Financial stocks led the decline, with Goldman Sachs (GS) down $7.49 for a 7.65% loss, Morgan Stanley (MS) down $2.82 for a loss of 11.94% and JP Morgan Chase (JPM) shedding $2.66 for a loss of 9.75%.

Among the money center banks banks, Citi ( C ) lost $0.60 or 15.19%, Bank of America (BAC) was down $1.33 for a loss of 19.30% while Wells Fargo, closed down $2.71 for a loss of 14.22%.

Regional banks were also big losers on the day. Being lower on the pecking order, traders are probably worried that financially weak regional banks would be the first to go, if the government decided to let some banks fail.

Regions Financial (RF) was down $1.40 for a 30.17% loss, Zions Bancorp (ZION) was down $2.89 for a loss of 19.47% and SunTrust (STI) was down $3.38 for a 27.17% loss.

Tags: Financial Stability Plan  Goldman Sachs  Zions Bancorp  Citi