Things were absolutely gruesome today in financial stocks. Good news was bad news, bad news was worse news, and no news meant the world was ending. The financial sector ETF (XLF) was off 3.6%, but that gives an over-sanguine view of the blood-letting out there.
Consider the following sectoral map, with some of the lowlights marked:
Catch those names? We have double-digits losses galore, with Countrwide and E*Trade both off more than 20%, and mortgage insurers like MBIA not far behind. While the real estate data was worse than expected — despite some hilarious spinning by NAR economist Larry on Bloomberg mid-afternoon — it wasn’t that much worse.
No, the market thinks it knows something, and what it thinks it knows is this: A large financial company is filing for bankruptcy protection. And Mr. Market will throws cluster-bombs around the sector until that company ‘fesses up, whether it’s Countrywide, which the company denied today, or E*Trade, or maybe the U.S. Treasury. People aren’t going to believe it’s not going to happen until, in a perverse way, they strive stocks down enough to make it happen.