Financial stocks hit new lows despite U.S. cash infusions

If the government’s financial-system rescue plan was supposed to give investors comfort about holding stocks of banks, brokerages and other industry players, maybe it’s time for Plan B.

Do they have a Plan B?

Many financial issues today have tumbled below their October closing lows, a distressing sign for market bulls who were hoping stocks had bottomed last month.

The financial-sector index of the Standard & Poor’s 500 was down 3.8% to 176.69 at about 10:30 a.m. PST, below its October closing low of 179.22 set on Oct. 27.

It’s another bad day for stocks in general, but apart from the financials most market indexes remain above their October lows.

By contrast, Citigroup Inc., which got a $25-billion infusion of federal money last month to bolster its capital, was down 72 cents, or 6.4%, to $10.49, a new 12-year low.

American Express Co. was off $1.46, or 6.1%, to $22.52, breaking below the seven-year closing low of $23.08 set on Oct. 27.

AmEx on Monday got approval to become a bank-holding company, which will allow it to apply for a capital injection under Uncle Sam’s program. But that obviously isn’t making shareholders feel better about the credit card giant’s prospects.

Goldman Sachs Group, which got $10 billion under the bailout program, was down $1.79, or 2.5%, to $69.42, its fifth straight decline and a new five-year low. Investors are focused on expectations that Goldman will report its first quarterly loss since came public in 1999.

Meanwhile, Newport Beach-based mortgage lender Downey Financial Corp. has crumbled 86 cents, or 59%, to 59 cents. The company warned late Monday that regulators may seize it before year-end if it can’t raise additional capital.

Downey so far hasn’t seemed a likely candidate for government help because the Treasury is aiming its program at lenders that have the best prospects for survival.

But government-guaranteed survival clearly isn’t enough to keep many financial-stock investors from jumping ship, anyway.

Photo: Citigroup's headquarters in New York (Stephen Chernin / Getty Images)

Comments

[Ron]

Downey will be taken off life-support by this time next week.