Financials Nudge Markets Down

Anxiety over Fannie, Freddie, fate of regional banks kill early rally
By Nick McMaster,  Newser Staff
Posted Jul 14, 2008 3:31 PM CDT
Traders work on the floor at the New York Stock Exchange in New York, Monday, July 14, 2008.    (AP Photo/Seth Wenig)
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(Newser) – The markets saw modest losses today, erasing an early-session rally spurred by the announcement of a government bailout plan for Freddie Mac and Fannie Mae as investors mulled the ramifications of a government rescue, MarketWatch reports. The Dow fell 45.35 points, closing at 11,055.19. The Nasdaq shed 26.21, closing at 2,212.87, and the S&P 500 lost 11.19, to close at 1,228.30.

Traders worry that the government is only able to rescue a small percentage of Fannie/Freddie’s debt—the combined $5.2 trillion in mortgages is almost double the entire federal budget for 2008. "Reality is setting in," one analyst said. "The news over the weekend regarding Fannie Mae and Freddie Mac was good—but also bad in that it's confirming what the market feared all along."