CIT Group Inc (CIT), Another Bank Fails
Just when you thought it was safe to buy financials, another back falls into bankruptcy and their stock goes to zero. The common stock of CIT fell close to 75% today as it struggles to stay afloat and looks for a reported $2-3 billion in financing. Along with CIT, insurers and banks are taking a hit with Aflac, Genworth, Lincoln Financial, and Conseco falling on their perceived exposure to the large commercial bank.
Overall Market Direction
Prior to the news of the demise of CIT, the market had rallied from a selling point around 1745 on the Nasdaq to a buy position above 1850 on the index. Over the week, the Dow Jones Industrial gained over 5% as the earnings season kicked off and investors felt better about the economy and company results. But the CIT news and weak regional manufacturing caused a pause in the rally for today.
If you feel like gambling, the CIT options have seen a large spike in volume today at Call strikes of $1 and $2 in addition to Put strikes on $1 and $2 in the closest months. Otherwise staying on the sidelines until there is a clear direction in the overall market is not a bad ideal. The markets could rally for a couple more weeks as good earnings numbers are released by varying corporations. But the downward trend is likely to resume as the end of the reporting season nears.
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