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Financials Skid, Spark Sell-Off

Financials plummet on the prospect of a GSE bailout

By Nick McMaster, Newser Staff

Posted Aug 18, 2008 3:26 PM CDT

(Newser) – The markets took a tumble today as familiar fears about a government bailout of Fannie Mae and Freddie Mac returned to the fore, MarketWatch reports. Led by its financial components, the Dow fell 180.02 to close at 11,479.88. The Nasdaq shed 35.54, settling at 2,416.98, while the S&P 500 dropped 19.54 to close at 1,278.66.

A Barron’s report said the likelihood of a shareholder-annihilating government bailout for Fannie and Freddie is increasing. In a separate report, Merrill Lynch analysts cut their price target for the GSEs. In their wake, shares of both Fannie and Freddie fell over 21%. Adding to the unrest, a Wall Street Journal report said Lehman Brothers could lose $1.8 billion this quarter. Lehman fell 6.7%.

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In this May 2, 2007 file photo, the Fannie Mae building in Washington is seen. Rescue legislation sailed through the House Wednesday, July 23, 2008, aimed at helping 400,000 strapped homeowners avoid... (AP Photo/Manuel Balce Ceneta, file)

Traders work the floor of the New York Stock Exchange in this undated file photo. (AP Photo/Richard Drew)

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Financials Skid, Spark Sell-Off