Fannie and Freddie, data to rule stocks

Tag : two for one

The week kicked off on Sunday when the United States announced boldmeasures to support Fannie Mae (FNM.N) and Freddie Mac (FRE.N), government-sponsored home finance companies that own orguarantee about one in two mortgages in the United States. Fannieand Freddie's shares were hammered last week amid mounting fears ofcapital constraints and played a major role in the market's weeklydecline.
The Treasury and Federal Reserve unveiled sweeping steps to shoreup the troubled mortgage financing giants if need be and head off apotential meltdown in global financial markets.
The Fed said the companies could access its discount window foremergency cash. The Treasury separately said that it wouldtemporarily increase its line of credit to the two, as well aspurchase equity in them, if needed.
The move by the Fed echoed its emergency action to help rescueinvestment bank Bear Stearns in March, when it opened the discountwindow emergency lending facility to investment banks for the firsttime since the Great Depression.
"This action over the weekend by the Fed and other governmentagencies shows that the government is trying to shore up not onlythe financial system but to create confidence in the U.S. equitymarket," said Scott Fullman, director of derivative investmentstrategy at WJB Capital Group in New York.
"The question now is whether the confidence can be sustainedand if there are more skeletons in the closet."
Apart from Fannie and Freddie, Wall Street will also focus onFederal Reserve Chairman Ben Bernanke this week, when he isscheduled to appear twice on Capitol Hill to give his semiannualtestimony on monetary policy. He is set to testify on Tuesdaybefore the U.S. Senate Banking Committee, and on Wednesday beforethe U.S. House Financial Services Committee.
Investors will latch on to anything Bernanke says about the U.S.economy, inflation and interest rates.
"The bottom line is that we're in the middle of a financialtsunami. This is a storm the likes of which this country hasn'tseen," said Peter Kenny, managing director at Knight EquityMarkets in Jersey City, New Jersey. "The market right nowneeds to see results. It no longer gives anyone the benefit of thedoubt."
Fannie Mae and Freddie Mac, which own or guarantee almost $5trillion in mortgages and package them into bonds, face mountinglosses from loan delinquencies and foreclosures. Investors fearedlast week that if they were hampered from doing business, theparalysis would worsen the housing crisis.
This week also brings a torrent of numbers from earnings reportsand economic indicators. It will be one of the busiest weeks forquarterly earnings, with reports from Dow component Citigroup (C.N), the No. 1 U.S. bank, and technology bellwether Google(GOOG.O), the leading Web search company.