- Pre-Market Indications

Monday, July 14, 2008

Opening View: Federal Reserve Attempts to Aid Fannie Mae and Freddie Mac

In an attempt to bolster investor confidence, the Federal Reserve and the Treasury Department yesterday announced steps to aid beleaguered mortgage giants Fannie Mae ( FNM: View sentiment for FNMsentiment, chart, options) and Freddie Mac (FRE: View sentiment for FREsentiment, chart, options) . The central bank granted the Federal Reserve Bank of New York the power to lend to the duo at a rate of 2.25% - the same rate given to commercial banks and large Wall Street firms. The Fed said the plan should help FNM's and FRE's ability to "promote the availability of home mortgage credit during a period of stress in the financial markets." What's more, Senator Christopher Dodd noted the disparity between the twosome and the recently failed IndyMac (IMB), stating, "IndyMac engaged in very bad mortgages, luring people into deals they could never afford. That's not the case with Frannie and Freddie."

Anheuser-Busch (BUD: View sentiment for BUDsentiment, chart, options) has agreed to a takeover by Belgian brewer InBev, in a deal valued at $52 billion. The merger will create the world's largest beer maker, Anheuser-Busch InBev, which is expected to generate cost synergies of $1.5 billion per year annually by 2011. The North American headquarters for the new firm will be in St. Louis, while InBev Chief Executive Carlos Brito will maintain the reigns at the top post.

Elsewhere, Continental Airlines (CAL: View sentiment for CALsentiment, chart, options) announced that it will post a pretax second-quarter charge of $58 million relating to capacity reduction plans slated later this year. After adding stock-sale-related gains, tax credits, and other non-operational items, the airline is expected to post a total after-tax gain of $22 million. In pre-market activity, the shares were downgraded to "neutral" from "outperform" at Credit Suisse, with the broker slashing its price target on the equity to $9 from $15. According to Thomson Financial, the average 12-month price target on the security stands at $27.70.

Opening View: Federal Reserve Attempts to Aid Fannie Mae and Freddie Mac

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