Financial Sector Has Many Investors Worried
Finance companies have been taking a beating recently in the stock market. Industry giant Merrill Lynch reported a $7.9 billion write off earlier this week, a much larger loss than analysts anticipated. This prompted a large sell off of the stock this past week, although the stock did recover slightly as some investors came in at the end of the week seeking bargains.
They aren’t alone in reporting huge losses in the third quarter as the crisis in the sub-prime mortgage market is having a huge effect in this sector. Some analysts believe the only thing keeping the general stock market afloat has been a very strong tech sector. Many are predicting that the woes of the financial sector will only get worse.
A large number of adjustable rate mortgages are about to reset upwards in the upcoming year and the general consensus is that foreclosure rates will climb even further. An already weak commercial paper market is also expected to get worse. Investors are hoping and praying that this will prompt the Federal Reserve to lower interest rates by another 50 basis points.
The general economy remains strong but many fear that a continued weakness in the housing sector could lead to a slowing of growth and could have an impact on other segments of the economy as it already has on the financial sector. While no one wants to talk about a recession, it is on the back of many investors minds.
