Stocks surge on Fannie, Freddie rescue
Wall Street hails government's announced takeover of mortgage backers, with Dow up over 300 points. But Fannie and Freddie shares tumble
NEW YORK (CNNMoney.com) -- U.S. stocks jumped Monday morning, with the Dow up more than 300 points, as investors hailed the government's announced takeover of mortgage giants Fannie Mae and Freddie Mac.
Fannie-Freddie: On Sunday, Treasury Secretary Henry Paulson and James Lockhart, director of the new Federal Finance Housing Agency, said the agency was placing Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) under a "conservatorship" and that the Treasury would extend $200 billion worth of support.
While the markets perceive this as good news overall, it could wipe out individual stock owners. Fannie-Freddie's $36 billion worth of shares are owned by a plethora of financial institutions including JPMorgan Chase (JPM, Fortune 500) and Sovereign Bancorp (SOV, Fortune 500), according to Keefe, Bruyette & Woods.
Shares of the two companies fell more than 80% in early trading.
World markets: Asian markets finished sharply higher in reaction to the Fannie-Freddie bailout, with Japan's Nikkei index gaining 3.4%. European stocks rallied in midday trading, with Britain's FTSE rising 3.8% and German's DAX gained 3.4%.
The dollar rose versus the euro and the British pound, but slipped against the yen.
Economy: At 3 p.m. ET, the Federal Reserve will announce the level of consumer debt for July. A consensus of analysts projects $8.5 billion, down from the prior month's total of $14.3 billion.
Oil: Crude futures rose $1.68 a barrel in electronic trading to $107.91, fueled by anxiety over Hurricane Ike. The hurricane is expected to enter the Gulf of Mexico - home to 4,000 drilling platforms, 32 refineries and 33,000 miles of pipeline - when it's finished tearing through Cuba.