Worries about Mac and Mae by Livia Cseresova

The turbulent end of last week was partly caused by Wall Street’s angst about fallout from credit crisis .Stocks tumbled, soared and then fell, as investors tried to evaluate dangers faced by Fannie Mae and Freddie Mac, who are the biggest mortgage financers of the U.S.

The industrial average of Dow Jones slightly moved into positive territory on Friday, before ending down more than 125 points. All the big indexes ended with another losing week.

The focus of trading Friday was the destiny of the government-chartered companies. The fall of shares of Mae and Mac cause concerns about their stability, which worries Wall Street. It’s worried that a collapse of Mae and Mac would cause a shock to financial system. The Mac’s and Mae’s success is important because they hold approximately half the outstanding mortgages in the U.S.

Stocks fluctuated in the session amid different reports that the Federal Reserve could aid Freddie Mac and Fannie Mae. A Fed spokeswoman said, though, that the central bank had not discussed that with Mac and Mae.

It was said by some that Mac and Mae weren’t short of cash, but of access to capital. Jerry Webman, chief economist at Oppenheimer Funds Inc. said that “The issue is who is going to make good on the long-term debt, not who is going to provide them with short-term cash."

Dow was left down 128.48 to end at 11,100.54 falling to 10,977.68. Last time it traded below 11,000 in July 2006.

Other stock indicators logged declines too. The Standard & Poor's 500 index fell 13.90 to 1,239.49, and the Nasdaq composite index fell 18.77 to 2,239.08.
Wall Street moved into a bear market, which is a 20 percent fall from a recent peak, thanks to Friday’s drop. For the week, the Dow fell 1.67 percent, the S&P 500 by 1.85 percent and the Nasdaq by 0.28 percent.

Oil rose to a trading record of $147.27. For August delivery, it settled up $3.43 at $145.08.

Bond prices fell as investors worried a bailout of Fannie Mae and Freddie Mac could dent the government's credit.

Concerns about financials dominated trading. Freddie Mac fell 25 cents at $7.75. and Fannie Mae fell $2.95,to $10.25. Lehman Brothers Holdings Inc. fell $2.87, to $14.43.

Citigroup Inc. said it will sell its German retail banking operation to France's Credit Mutuel for $7.7 billion. Citi dropped 9 cents to $16.19.

Major names like JPMorgan Chase & Co. and Merrill Lynch & Co. JPMorgan fell $1.35 to $33.16 and Merrill drop $1.10 to $27.61.

The good news is that the U.S.’ trade deficit narrowed in May as exports climbed to all-time highs. But the good news didn’t really help the investors. On the New York Stock Exchange, the declining issues outnumbered the advancers by 2 to 1.

by Livia Cseresova for PocketNews (http://pocketnews.tv)

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posted by Lucia Adamova