Transcripts

Frets About Fannie Mae & Freddie Mac Spark A Stock Sell-Off

JEFF YASTINE: A big sell-off on Wall Street on new concerns about mortgage giants Fannie Mae and Freddie Mac. The Dow lost 180 points, the NASDAQ fell 35. Shares of Fannie and Freddie both tumbled more than 20 percent, even after U.S. Treasury Department officials said again today they have no plans to bailout the two struggling companies. That development came after an article in "Barron's" suggesting a growing likelihood the Treasury would recapitalize the firms, essentially nationalizing them. Also today, Merrill Lynch said Freddie Mac may have to raise $5.5 billion this quarter rather than waiting until next year. Standard & Poor's market strategist Alec Young says the uncertainty surrounding Fannie and Freddie is fueling market jitters.

ALEC YOUNG, EQUITY STRATEGIST, STANDARD & POOR'S: Even the semblance of the Treasury Department sort of distancing themselves from Fannie and Freddie is enough to get equity investors very nervous and we think that's really what's driving the broad sell-off today.

YASTINE: Those concerns about the housing market have kept sentiment at a record low among U.S. home builders. The National Association of Homebuilders' sentiment index posted an August reading of 16, the second straight month at that level. Readings under 50 are considered poor. Falling home sales and rising foreclosures are keeping more homes on the market, reducing the need for new ones. Still, the NAHB is optimistic the Federal housing legislation passed in late July will help buyers get back into the market.