CIT Group Inc (CIT), Another Bank Fails

by Steve Patterson on Thursday, July 16, 2009 10:28 AM

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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7 comment(s) so far...

Anonymous 7/25/2009

I wonder when will this trend change direction? I don`t feel like risking right now.

Anonymous 7/27/2009

That is the world we live in. Some companies will go bankrupt because it is unavoidable. The global economy needs to shake the crisis and stand on its own legs again. This will eventually happen but I think that a year or maybe even one and half will pass before we see some solid evidence of economy running again instead of sitting still or even falling back. It is a natural thing - if something is going faster and faster, eventually it must slow down or even fall down. Then it rises again and the cycle is closing.

Anonymous 8/2/2009

just like you said, you figured it might have been safe to buy, i feel that this might be the "last" of the banks failing. Today I saw the very first commercial of Wells Fargo/Wachvoia, it was a bit of relief.

Anonymous 8/3/2009

I am not surprised anoth bank failed today we obviously have not seen anywhere near the end of this crisis. Who knows what is lying under the surface yet to come out?<br><br>Dave

Anonymous 8/10/2009

CIT has long been risky. They used to factor a great deal of inventory for hard goods retailers and the writing on the wall could be seen when they pulled out.

Anonymous 8/22/2009

It is amzing how many backs are actually bankrupt unable to cover thier debt, the chealsea building society just suffered a loss but that was owing to some fraud,<br><br>dave

Anonymous 5/8/2010

I am not surprised anoth bank failed today we obviously have not seen anywhere near the end of this crisis. Who knows what is lying under the surface yet to come out?