GOOD MORNING. Stocks in Asia closed lower today, European shares are down, and U.S. futures are pointing to a mixed open.
Following yesterday evening’s vote by Senate Republicans to block the financial oversight bill from reaching the floor for debate, developments on Capitol Hill today could increase volatility in the stock market. While the vote by Republicans threw a wrench into what the Obama administration has hoped will be a fairly quick and bipartisan piece of legislation, for investors, it signaled that the final bill could end up being a bit more favorable to banks.
As long as terms for the legislation are uncertain, speculation will lead to market ups and downs, analysts say. It’s likely that some type of financial regulation bill will come to fruition, but the question remains about how hard it will come down on the large banks and institutions. “Punishing poor judgment or excess greed is desirable to encourage market players to think twice before they carelessly engage in risky activity,” wrote Charles Lieberman, chief investment officer at Advisors Capital Management in a report. “But, greed will not disappear. Legislation should be focused on changing some institutional structures to enable large firms to fold without creating ripples elsewhere in the system.”
Meanwhile, later today top executives from Goldman Sachs (GS) including chief executive Lloyd Blankfein are expected to appear before the Senate Permanent Subcommittee on Investigations, which yesterday released a slew of emails suggesting that the company was betting on a housing meltdown.
In the near term, Goldman Sachs investors can expect the company’s stock to continue falling, possibly to as low as $120 a share, says Karl Mills, president and chief investment officer at Jurika, Mills & Keifer, an investment advisory firm. The stock is already down 17% since the Securities and Exchange Commission investigation was announced earlier this month. But investors who can hold on for the long term should since the stock will most likely see substantial gains down the road, he says. “These sagas take two to six months to really run their course,” says Mills. “In this case it’s a little different – you’re talking about financial services reform, and once it’s passed, you remove the uncertainty and then banks and financial institutions can get back to doing what they do.”
IN OTHER NEWS:
- Research in Motion (RIMM) stock is up after the Smartphone maker debuted a revamped operating system for the BlackBerry. LINK
- Daimler AG (DAI) posted a net profit of $817 million for its first quarter 2010. LINK
- Risk premium on Portuguese bonds is rising on fears of Greek contagion. LINK
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