Just when you think things must be bottoming out for the financials, the news got even worse today. Today's news confirmed many investors worst fears, the credit crisis is far from over. Lehman Brothers (NYSE:LEH) announced today that it would lose $2.8 billion in the second quarter and that it would be raising $6 billion in capital in an offering to unnamed investors. Since Lehman came public this is the first time the company hasn't posted a quarterly profit. Some on the street, including David Einhorn of Greenlight Capital, are saying this isn't the entire story and there is plenty more bad news to come. Washington Mutual (NYSE:WM) shares plunged 17% today after a UBS analyst estimated that the company would lose $22 billion and not reach profitability again until late 2010. That news haunted the financials even more, and things got quite ugly today.
Though the overall market had a decent day today, the financials were a very different picture, with major losses being the norm. JP Morgan Chase (NYSE:JPM), which had been one of the strongest bank stocks until recently, saw its shares plunge another 6.44% today. American Express Company (NYSE:AXP) shares fell 1.21%. To demonstrate just how widespread the damage is in the sector I want to take a look at some of the important names in the financial sector that hit new lows today.
52 week lows
- Merrill Lynch and Company (NYSE:MER) Shares were pressured by the Lehman news and lost 3.23% today.
- Bank of America (NYSE:BAC) BAC has been under pressure regarding the Countrywide deal. It's shares lost 2.92% on huge volume today.
- Huntington Bancshares (Nasdaq:HBAN) Shares fell 4.71% today and have lost 66% in the past year.
- Zions Bancorporation (Nasdaq:ZION) Lost 5.38% on double its normal volume.
- Ameriprise Financial (NYSE:AMP) This financial planning firm has seemingly gone awry of late, and even Buffett has gotten off this ship.
- KeyCorp (NYSE:KEY) This one is another of the midwest regional banks that has been hit hard. KEY lost 3.76% today.
So are these stocks finally reaching bargain levels? Should you jump in? The truth is that there is no doubt that some of these financials will turn out to be great bargains and hindsight will have been 20/20 that you should have bought these stocks when they were beaten down the worst. The other truth though is that some of these smaller regional banks and other small financials may not come out of this. Right now we are back in a period of where the street is waiting for the next shoe to drop. I believe investors would be more wise to let this play out some and see which companies get things going in the right direction first before pulling the trigger. You might miss the absolute bottom, but you'll still have a great bargain. Some may have been upset that they didn't buy WM at $13.50 in January before it popped to $21.85 in early February, but the stock now sits at $6.25.
The financials are certainly looking cheap, but this credit crisis won't be over anytime soon. Keep your wits about you before going headlong into this mess that is the financial sector.
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