Around the markets: Day 1 of the short-selling curb, a big quarter for Jacobs, and riots get results in Pakistan
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Some highlights from around the markets today:
---Prove to us how short you are: The Securities and Exchange Commission’s temporary rule to curb ‘naked’ short selling in 19 major financial stocks took effect Monday. If bullish investors were hoping the change would extend last week’s broad rebound in the financial sector, they probably came away disappointed: The 19 stocks were a mixed bag.
Fannie Mae, for example, rose 73 cents to $14.13, its fourth straight gain. But Freddie Mac slid 43 cents to $8.75. In the banking sector, Bank of America Corp. rose $1.07 to $28.56 on its better-than-expected earnings report, but JPMorgan Chase & Co. lost $1.37 to $38.65.
SEC Chairman Christopher Cox, who announced the rule on July 15, said at the time that the SEC was concerned that some short sellers (traders who borrow stock and sell it, betting the price will drop) were selling shares without actually arranging for a stock loan. That’s naked shorting, and it can hammer stocks mercilessly. The new rule requires the shorts to show they’ve got a stock loan set up.
Two new great Bloomberg reads on the shorting controversy: This one notes that two hedge fund groups don’t want the SEC’s temporary rule extended (surprise!); this one is a longer story about the boom in short selling worldwide.
---No recession here: Pasadena-based Jacobs Engineering Group, which operates around the planet in the infrastructure and industrial engineering and construction businesses, late Monday reported another big quarter. The company said fiscal third-quarter revenue jumped 40% to $2.9 billion. Net income was up 45% to $108.7 million, or 87 cents a share.
CEO Craig Martin described business as ‘very good,’ which almost sounds like an understatement. And the company raised its estimated earnings range for the full year to $3.15-$3.40 a share. In April it had forecast a range of $3-$3.30.
Jacobs’ shares rose $2.12 to $83.53 before the report. The stock rocketed 134% last year but investors have taken some money off the table this year; the price is down almost 13% year to date.
---Maybe rioting is the answer, after all: Pakistan’s Karachi-100 share index rose for a second straight session on Monday, gaining 1.4%. The country’s stock markets were besieged by angry, stone-throwing investors last Thursday after shares plunged 18% over 15 consecutive losing sessions.
On Monday the markets got a lift on news that Finance Minister Syed Naveed Qamar would visit the Karachi bourse on Tuesday to discuss ideas for stabilizing share prices. No word on whether he has asked the U.S. Securities and Exchange Commission or Treasury Secretary Henry M. Paulson Jr. for advice.