What a disastrous day!
After running up to 11,575 shortly after the open, the market fell off a cliff and closed 345 points down from there at 11,230. We have retraced all of Monday's gains and sit back on Friday's close, with Friday's low still 200 points below us. 91% of the S&P 500 lost money today as did ALL 10 sectors – we finally got heavy volume (1.7Bn on the NYSE) and it was almost all selling.
LEH led the collapse, falling 45% from its open. Things seemed all right at first, they had already taken a hit on the withdrawal of the offer from Korea yesterday and this morning (5:30) they announced a conference call for next Thursday in which they would discuss "key strategic initiatives for the firm" as well as Q3 earnings. Richard Bove came out with a much wider loss estimate for LEH at 8am, up to $3.17 from $2.32, estimating they would lose $7.39 for the year but MER UPgraded them to neutral pre-market based on their improved ability to attract capital. Even Cramer's TheStreet.com had a bullish report in the morning…
So where did it all go wrong for LEH? Well CNBC hit them at 9:59, as the stock was recovering from a morning gap down with "Lehman Shares Fall as Korean Investment Grows Dim" (note this has been updated since then but original title is on this page) then Forbes hit them with a video-cast "Lehman's Fate remains Uncertain" at 10:40 as well as the print version "For Lehman, Uncertainty Looms." By 11, the stock was already down at $9.75 from a $14 opening and the XLF had already begun gathering downward momentum which continued all day.
While nothing actually happened to LEH in the morning, by the afternoon the S&P put them on credit watch due to the drastic loss in share value, effectively locking them into their basement position. Over $5Bn in shareholder value was lost today but that's nothing compared to the $40Bn they had already lost since early this year. Things got so dire in just 6 hours of trading that the company announced they were moving up their earnings call to tomorrow morning, which didn't really help the stock but at least we'll know what's really up in the morning.
Steel was not at all up today with that whole sector trading down 11.6% on the day lending credence to the idea that $101.87 oil may indeed be a bad sign for the global economy. The overall commodity sector fell 1.7% led by many gold miners hitting 52-week lows. On the whole, a truly terrible day in the markets…
