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Market Recap: Morgan Stanley Earnings, SLM CEO Shocks, Markets Mixed


Morgan Stanley reported more write-downs, but China stepped in for a 9.9% stake. SLM CEO shocks investors.

The markets were mixed in today's action. The Dow Industrials fell -25 points, or -0.19% to 13207, the S&P 500 fell -1.98 points, or -0.14% to 1453, and the Nasdaq Composite added +4.98 points, or +0.19% to 2601.

This morning all eyes were watching numbers from Morgan Stanley (MS). The company reported earnings of -$3.61 EPS versus estimates of -$2.09. Net revenues came in at $28 bln, the second highest in the firm's history. The company also announced an additional $5.7 bln in writedowns due to U.S. subprime and other mortgage related exposure. The loss was the first time the company reported a loss; however, China stepped in to save the day as the country's sovereign wealth fund announced it would acquire a 9.9% stake in the company.

Stay informed, stay successful. Get your free two-week trial of the Buzz & Banter and get real-time information, observations and ideas from our Minyanville professors.

"Do you remember how Goldman couldn't get up yesterday morning? That was a sign. You see how Morgan isn't trading down pre-opening? It's the same sign, only in reverse," said Toddo. MS finished +4.18% with other banks mixed. Goldman Sachs (GS) added +1.32%, Merrill Lynch (MER) fell -1.41%, Lehman Brothers (LEH) added +1.63%, and Bear Stearns (BSC) fell -2.15%. The Philadelphia Bank Index (BKX) fell -0.11%. Read Toddo's Hump Day Scrum: A First For Mother Morgan.

The markets were in positive territory throughout much of the morning but suffered a sudden turnaround when S&P announced that it was lowering the credit rating outlook for MBIA (MBI) and AMBAC (ABK) to negative from stable in addition to reducing the outlooks for Financial Guaranty Insurance and XL Capital to negative. The changes were due to "worsening expectations" according to S&P for insured nonprime residential mortgage securities and CDOs of asset-backed securities.

The pressure was further compounded as investors got wind of SLM's (SLM) conference call. In the call the CEO Albert Lord told investors an increase in borrowing costs would hurt the company's profit growth. As Prof. Depew wrote, "In one particularly hostile exchange, Lord said he 'didn't know' the answer to the question what SLM stock is worth."

"We're trying to figure out what your stock is going to be worth and you've got to give us some guidance."

"You should give Steve [McGarry, Managing Director of Investor Relations] a call," Lord said.

"But you're the CEO," the questioner objected.

"That's right. I'm the CEO," Lord replied. "Next question."

Yet the shock hit its peak when Lord closed the call by saying "Steve, let's go, there's no questions, let's get the f*ck outta here." SLM shares plunged -20.7% hitting a new 52 wk low. For more, read Professor Depew's Five Things You Need To Know.

In commodities, crude inventories had a draw of -7586 k barrels. The figure sent crude oil prices surging +1.28 to 91.36. Silver added +0.057 to 14.22, and copper added +7.35 to 295.80.

For more summaries, click on Minyanville's Buzz Bits.

Idea Flow

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: SAP, MS, NKE, APSG, FCSX, GOOG, BIDU, RIMM, SBUX, CPO, BSC, DBA, FCEL, SDTH, WFR

Some bearish trade or investment ideas: FRPT, BSC, COH, VICR, AXP, KMX, C

Hope you had a happy hump day! Have a good night!

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No positions in stocks mentioned.

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