The Labor Department also reported that the unemployment rate was 6.1%, up from 4.7% a year ago. Over the past year the number of unemployed has increased from 2.2 million to 9.5 million. There were employment gains in government, education, and healthcare jobs, but an overwhelming cut in the manufacturing, auto-maker, home builder, retailer, and financial sectors completely outweighed these gains. Analysts believe that even with the passage of the $700 bailout plan, the weakening economy and the job market will probably continue to get worse, and the unemployment rate may hit 7-7.5% by the end of 2009.
On a slightly better note, The Institute for Supply Management said its non-manufacturing index came in at 50.2, above the level of 50, which signals expansion. This reading is attributed to a small increase in new orders. The service sector represents nearly 80 % of US economic activity, and includes businesses like airlines, hotels, restaurants, and banks.
Wells Fargo (WFC: 34.56, -0.60 (-1.71%)) signed a $15.1 billion agreement to buy Wachovia (WB: 6.21, +2.30 (+58.82%)) while Citigroup (C: 18.35, -4.15 (-18.44%)) and federal regulators insisted that Citi’s takeover of Wachovia move forward. This surprise move to be taken over by Wells Fargo in an all stock deal, with no government assistance, completely caught regulators off guard and shook up the financial sector a bit today. If the deal goes through, Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Wachovia they own. This values Wachovia at about $7 per share. Wachovia’s board approved Wells Fargo’s offer, but the deal is still subject to Wachovia shareholder and other regulatory approval. The Citigroup deal, announced on Monday, would have been done with the help of the FDIC. The FDIC is standing behind the agreement it made with Citigroup. Citi demanded that the deal between Wachovia and Wells Fargo be called off, and claimed its deal with Wachovia prevented Wachovia from negotiating with or entering into any transaction with any firm but Citi. Citi is threatening to sue, and this newly created fight for Wachovia comes in a very volatile time for banks and financial firms as they continue to struggle with the current credit crisis and a battler for control of Wachovia could really stir some things up.
American International Group (AIG: 3.86, -0.14 (-3.50%)) announced today that it will focus on its core insurance business and sell off the rest of its businesses in order to repay up to $85 billion borrowed from the government. AIG will keep its US property, casualty, foreign, and general insurance businesses, as well as retain an ownership interest in its foreign life operations. CEO Edward Libby stated, “Literally, everything else that doesn’t fit under that definition we are considering for sale.” Libby added that there are some buyers lined up and that they hope to sell off these units as quickly as possible, so we will have to continue to watch this situation and see who steps up to buy these other businesses from AIG.
That’s all for today, catch me next week, same time, same place, for the Bullish Bankers’ Daily Market Recap.
