Written by admin on July 21st, 2009
US Stocks Drop As A Result of Devaluing CIT Shares
As of Thursday, July 16, the stocks for CIT Group Inc. experienced a serious drop. This was precipitated by failed rescue discussions with the federal government. This event served to overshadow JPMorgan Chase’s second-quarter results, which had fared better than estimates from Wall Street suggested.
The sector’s primary exchange-traded fund, the Financial Select Sector SPDR Fund (XLF), was down at 1.5% to $12.08 during recent trading.
CIT, a weakened business lender, is currently without the means to receive any additional funds or support from the federal government in the near future.
Representatives from the lender were in a rush to come up with $2 billion in bailout financing from their existing debt holders, according to unnamed sources. CIT has also made indications to its investors that if it does not receive some form of rescue financing that it may file for bankruptcy protection.
The specific drop in the price of CIT shares totally 66%, placing at 55 cents a share.
Should there be a bankruptcy in CIT’s future, it would have a ripple effect on the larger financial market. It may be the sort of trial that tests the system’s sustainability. The lender is a financing source for thousands of small to medium-sized businesses.
Along with CIT, the shares of JPMorgan Chase have been trading down by more than 1%. JPMorgan Chase is a mainstay of the Dow Jones Industrial Average and the largest holding in the XLF.
According to reports, the company saw a 36% increase to $2.72 billion on its second-quarter report. This is equals about 28 cents a share. JPMorgan’s revenues rose 39% to $25.62 billion, via its host of investment banking businesses.
Still, some numbers drew the attention of analysts who are becoming increasingly concerned about the trend in default loans.
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