The S&P 500, down 1.9% over the week, posted its sixth straight weekly decline – the longest such run for four years. US stocks slumped as investors rushed to sell Fannie Mae and Freddie Mac on speculation that a government bail-out could wipe out shareholders while oil prices spiked above $147, pummelling consumer-facing stocks.
Fannie and Freddie have come under massive selling pressure lastweek
on fears that they are not adequately capitalised to meet the demands
of the current housing crisis. Analysts said falling share prices and
widening credit spreads meant that raising the necessary funds would be
extremely difficult. Freddie and Fannie shares plummeted as much as 50%
before recovering to $7.75 and $10.25, respectively, down 3.1% and
22.4%.
JPMorgan
slid 3.9% and Bank of America fell 3.1%. Lehman Brothers slumped 16.6%
while the S&P 500 homebuilders index dropped 3.4% to its lowest
level in seven years. The financials sector as a whole fell 2.6% and
has now lost over half its value since the peak in February 2007.
In the background, oil prices surged,
before easing back, putting immediate pressure on consumer-facing and
energy-dependent stocks. Wal-Mart fell 1.6% while Dillard’s dropped
7.4%. The consumer discretionary and staples sectors slid 1.2% and
0.5%, respectively.
On Tuesday, results from Alcoa came in better than expected, helping it advance 5.7 per cent to $34.64 over the week. On Friday, industrial bellwether General Electric also posted decent second-quarter results. GE rose 2.8 per cent to $27.66 over the week.