Fannie Mae Doesn’t Damp Stock Market
Fannie Mae reported a stunning loss for Quarter 2. The company insists that it will not need the bailout approved in the recently passed housing relief bill. Despite all that Fannie execs can say with regard to avoiding the need for taxpayer money, I’m not sure that this is reality.
What to do? Mudd — whose name is mud in my book — says Fannie Mae will reduce its dividend from 35 cents a share to 5 cents a share and stop buying Alt-a mortgages — those “made to borrowers with solid credit but little proof of their income, or small or no down payments.”
This is a severe blow for those who rely on dividends for part of their income stream. Additionally, it’s a bit of a letdown for those with Alt-A loans facing foreclosure. Alt-A loans are likely to comprise a large number of the next wave of foreclosures, and that could be a serious issue down the road.
However, the stock market still managed to open ahead this morning, with major indexes up. The news that oil prices continue to decline, along with some surprising economic data, have added a bit of confidence to the stock market.
BusinessWeek offers some insight into some of the stock performances today:
Among other stocks in the news Friday, McDonald’s Corp. (MCD) posted an 8% increase in July global comparable-store sales and a 16% increase in its systemwide sales for its worldwide restaurants. The company posted a 6.7% rise in July U.S. comp-sales.
Hormel Foods (HRL) expects third-quarter EPS to be in the range of 37-39 cents, citing higher than expected feed and fuel input costs at its Jennie-O Turkey Store segment. The meat processor adjusted its 2008 EPS guidance to $2.22-$2.28, vs. previous guidance of $2.30-$2.40.
Live Nation (LYV) reported better-than-expected second-quarter EPS of 2 cents, vs. 15 cents one year earlier, as higher costs offset an 18% revenue rise. Wall Street was looking for a 20-cent loss.
Sprint Nextel (S) says it is no longer pursuing the private placement of cumulative perpetual convertible preferred stock, and remains committed to paying down debt and strengthening its balance sheet. The company reiterated its forecast for free cash flow to improve substantially in the second half.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
Tags: stock market, stock market news, investing blog, Fannie Mae,
economy, investments, dividends
