Poor earnings reports and concerns over the European Debt Crisis drove stocks in the financial sector down Tuesday. The hardest hit was Jon Corzine’s MF Global Holdings Ltd. (MF), which lost nearly half its value today after reporting Q2 earnings Tuesday that showed record losses.
Record Losses Prompts Major Sell-off
MF Global posted a revenue of $205.9 million, 14 percent lower than last year and nearly $100 million short of the $301.4 million posited by many analysts. Most concerning for shareholders was that the fund lost $186.6 million, or $1.16 per share, the largest single-quarter loss in the fund’s history. Corzine, the former CEO of Goldman Sachs (GS) and Governor of New Jersey, remained calm, though. “Reflecting the stressed markets in the quarter, we deliberately chose to reduce overall market exposure in most principal trading activities and focused on preserving capital and liquidity,” he said in a statement. “The decrease in net revenue was primarily due to the contraction of proprietary principal activities, particularly in equities and fixed income, as the company reduced its risk appetite amid volatile market conditions.” Despite Corzine’s assurances, this comes one day after Moody’s Investor Services opted to downgrade MF Global’s credit rating to their lowest grade, stating that the fund was too heavily invested in risky assets and European debt, and the massive sell-off, which dropped shares to their lowest level since 2008, would seem to indicate that investors have lost faith in Corzine and MF Global.
Financial Sector Takes a Beating
MF Global is not the only company in the financial sector suffering through the volatile market and down economy. Industry leaders Goldman Sachs posted a Q3 loss of $393 million, or $0.83 a share, last Tuesday. It was only the second time in its history as a publicly traded company that it reported a loss for the quarter. Goldman Sachs’ stock took a hit today as well, falling about 3.5 percent. Joining Goldman in the rough day on the markets was JP Morgan (JPM), down 3.12 percent; Citigroup (C) down, 2.22 percent; Bank of America (BAC), down 3.87 percent; and Wells Fargo (WFC), down 3.66 percent. Bucking the trend, though, was mREIT Annaly Capital Management (NLY), which managed to post a modest increase of about 1 percent despite declines across the sector.
Markets continue to be plagued by uncertainty regarding the debt crisis in Europe. While Reuters reports that the International Monetary Fund is considering participating in the investment vehicle being created by the European Financial Stability Facility, many remain wary of the plan to save the Euro Zone to be unveiled on Wednesday. Wednesday’s meeting will prove crucial in stabilizing international markets and answering pressing questions about Euro Zone debt, but nagging concerns about the ability of European politicians to find a viable solution have kept American markets in turmoil.
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