Wall Street Poised for Mixed Open on Freddie loss

August 6, 2008 6:36:56 AM PDT
Wall Street headed for a mixed open Wednesday after troubled mortgage financier Freddie Mac reported a larger-than-expected second-quarter loss. Freddie Mac, which substantially increased its reserves for souring loans, lost about three times what Wall Street expected on a per-share basis. The company also announced that it expects to cut its third-quarter dividend to preserve capital.

Freddie Mac and sister company Fannie Mae, which hold or back nearly half of all U.S. mortgage debt, have lost billions of dollars due to failed loans over the past year. The federal government has pledged to help both companies with larger lines of credit or stock purchases if necessary.

The problems at both companies have contributed to the volatility on Wall Street in recent months. The market appeared calm early Wednesday, having soared more than 300 points the previous session on a reassuring economic statement from the Federal Reserve and another drop in oil prices.

In other corporate earnings released Wednesday, Time Warner Inc. said second-quarter profits fell 26 percent on declining subscriber fees at its AOL online unit and lower ad revenue at the Time publishing business. The results beat analysts' expectations, however.

Sprint Nextel posted a second-quarter loss on severance and other costs, but the wireless carrier still beat Wall Street estimates after excluding items.

Qwest Communications International Inc. said earnings fell 24 percent in the second quarter. The results, however, also narrowly beat expectations.

In premarket trading, Dow futures fell 35, or 0.30 percent, to 11,550.

The Standard & Poor's 500 index futures fell 2.80, or 0.22 percent, to 1,280.10, and the Nasdaq 100 index futures rose 4.25, or 0.23 percent, to 1,873.25.

Bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.01 percent from 4.02 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Investors are also keeping an eye on crude oil after prices fell sharply in the last two sessions.

Light, sweet crude for September delivery fell 32 cents to $118.85 in premarket electronic trading on the New York Mercantile Exchange, after earlier trading slightly higher.


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