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Market Recap: Markets Wobble Late on Fannie and Freddie News


Stocks regained ground after a late plunge caused by news that Fannie and Freddie could cost taxpayers as much as $363 billion if the housing market remains poor.

Stocks wobbled late as a government regulator revealed that Fannie Mae and Freddie Mac could cost US taxpayers as much as $363 billion to stay afloat if housing prices continue to drop over the next two years. The report's best case scenario said Fannie and Freddie would only cost taxpayers a total of $221 billion, while moderate economic growth in the US would bring the grand total to $238 billion.

The Dow Jones closed up 38.60 points (0.35%) to close at 11,146.57, while the S&P eked out a gain of 2.09 points (0.18%) to close out at 1,180.26. The Nasdaq closed up 2.28 points (0.09%) to finish the day at 2,459.67.

The average rate on a 30-year mortgage crept up to 4.21% from last week's 40 year low of 4.19%. Rates on 15-year fixed loans also rose slightly, to 3.64% from last week's 3.62%. Many will hope the upticks in percentage rates signal a bottom in mortgage rates.

US Leading Economic Indicators rose for the third month in a row, this time by 0.3%. The Philadelphia Fed general economic index also increased in October, switching from -0.7 to a reading of 1 as factory payrolls grew.

The Digital Entertainment Group reported today that DVD sales declined 16% over the first 9 months of 2010, from $6.72 billion to $5.67 billion. Total spending on films and TV shows also declined 4% to $12.6 billion.

Chevron (CVX) is one of the first companies to request permission to drill in the Gulf of Mexico since the drilling moratorium was implemented, as the oil titan looks to file for permits and permissions in the next few days. In a related announcement, Chevron announced it would invest $7.5 billion in two new oil fields off the coast of Louisiana.

United Airlines and Continental Airlines reported earnings jointly today, with United reporting EPS of $2.12 and Continental reporting EPS of $2.24. The two companies, which formed United Continental (UAL) in October, also reported revenues jumped 22% to $5.39 billion for United, while Continental saw revenues jump 19% to $3.95 billion.

Philip Morris (PM) reported earnings of 99 cents per share, or $1.82 billion from 93 cents and $1.8 billion last year. The slim 1.3% increase in profit mostly reflects a battle between reduced shipments to Japan and a rise in cigarette prices in Europe and Australia to help soften the blow.

Fifth Third Bancorp (FITB) reported a stellar quarter today, with earnings per share up 38% from last quarter at 22 cents, or $238 million. Revenues for the Cincinnati-based bank edged up in its mortgage banking and investment banking sectors, and slipped slightly in its corporate banking and credit processing sectors.

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No positions in stocks mentioned.
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