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Market Recap: Stocks Decline on Dull Monday


Wachovia leads financials downward.

Stocks declined on a rather uneventful Monday. The Dow Industrials fell -23 points, or -0.19% to 12302, the S&P 500 fell -4.5 points, or -0.34% to 1328, and the Nasdaq Composite closed -14 points, or -0.63% to 2275.

Topping headlines this morning were announcements made by Wachovia (WB). The fourth largest U.S. bank posted a $393 million loss for the quarter, its first in six years. The company also said it would cut its dividend by 40% and raise about $7 billion in common and convertible preferred stock in an effort to shore up its balance sheet. The common stock offering will be priced at $24 per share, a sharp discount to Friday's closing price, and the preferred offer will pay 7.5% and be converted to at roughly $31.20 per share.

Wachovia shares dropped along with the rest of the stocks in the financial sector. WB shares settled -8.13% to $25.55. Washington Mutual (WM) fell -5.4% to $10.35. Other notables included Goldman Sachs (GS) -2.22% to $163.59, Morgan Stanley (MS) -1.5% to $42.97. and Lehman Brothers (LEH) -1.23% to $39.38. For more on Wachovia, read Minyanville Editor Andrew Jeffery's column Wachovia Latest to Seek Capital.

Elsewhere, Blockbuster (BBI) made an unsolicited $1.35 billion offer to acquire Circuit City (CC). Blockbuster's all cash bid of $6-8 per share sent CC's stock price surging the most in 28 years.

The move baffled Professor Jeff Macke. "… candidly, I'm at a loss. 'Synergies' doesn't make a ton of sense. 'Real Estate' is bizarre – CC is in the process of changing its store base and Blockbuster, until very recently, was trying to morph into not having stores at all. Add it all up and what's my best guess? The thinking at CC and BBI is "Let's hold hands and jump off the cliff together."

BBI closed -10.2% to $2.81, and CC closed +27.44% to $4.97. Read Professor Jeff Macke's Blockbuster's Twisted Logic.

In other parts, Petrobras (PBR) was another one of the scarce sources of excitement today. Shares of the company gained +8% to $122.18 after the company said one of its oil fields may hold the equivalent of 33 billion barrels of oil. The news helped Hess Corporation (HES) as it holds a 40% stake in a block south of PBR's oil field. Those shares gained +9% to $101.19.

As for the credit markets, a report in Bloomberg said Jefferson County, Alabama is considering filing for Chapter 9 which would make it the biggest bankruptcy case in the history of the muni market. For more context, check out Professor Bennet Sedacca's Minyan Mailbag: Who's Buying Municipal Bonds?

In commodities, crude oil gained +1.69 to 111.83. Gold gained +1.80 to 925.40. Silver added +0.025 to 17.715 and copper declined -6.45 to 391.00.

The dollar index gained +0.049 to 71.856.

For more Buzz insight, check out Minyanville's Buzz Bits.

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: SPX, AAPL, BIDU, MA, XLF, PBR, AMAT, BRCM, STV, SLAB, OMTR, CLWR

Some bearish trade or investment ideas: SPX, NCC, KEY, SPY, CC, BBI, GDX

Have a great night!
No positions in stocks mentioned.

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