Stocks go on the decline in roller coaster trade, with the S&P 500 down more than 3.0%.
Initial results show that Lehman Brothers bonds were priced at
9.75 cents on the dollar during a an auction by credit default swap
sellers, according to Creditfixings.com, an executer of credit
derivatives. This mean that firms that sold Lehman credit default
swaps, which investors buy to protect against the default of a company,
will have to pay 90.25 cents on the dollar to the CDS holders. The
pricing was lower than what LEH bonds were trading at, according to
reports.
The financial sector (+0.6%) continues to post a gain, but is well off its high.
Energy stocks (-9.2%) are posting the largest decline due to weakness in crude oil prices (-7.2% at $80.24). Chevron (CVX
58.46, -5.55) said yesterday after the close that it expects third
quarter downstream (refining) earnings to improve from the last
quarter, but upstream (production) earnings are expected to decline
from the previous quarter. In the second quarter, upstream accounted
for nearly all of the company's profit, as downstream actually lost
$734 million.
Chevron said third quarter earnings are expected to be higher than
second quarter earnings, which means there is room for some
disappointment, as Chevron's second quarter earnings per share were
$2.90 compared to the consensus estimate of $3.24.