Someone help me with Wachovia?

Question

Why is it that when Wachovia announced a 9.8 billion dollar loss...their stocks rallied?

Answer 1

It didn't it went down, then they announced they were laying people off and cutting thier dividend from over $1 down to .35 cents, then it went up. Obviously people thought this was good financial steps that they were taking and the stock became attractive as people started buying it.

Answer 2

It is because they sold off their secondary mortgage business division.  Also, the loss was lower than expected.

Answer 3

Short covering ...

Answer 4

because the loss was not as bad as expected...

Answer 5

I think the most important news was the statement confirming that the operation does not need external cash infusion going forward.  This means WB risk of insolvency is very low and the potential dilution of stock ownership per share is removed.

The next most important factor pushing WB up is the strong trend of bottoming out and re-bouncing of the financial sector together with the cash transferring into financials from oil stocks.

The third factor is that WB continued segments of operations, except residential mortgage lending, have been generally expanding.  The actual cash loss for the last quarter was much lower than that $9.8b. A large portion, $6.1b, was a one time non-cash goodwill impairment charge; and of the remaining of $2.7b, over $1b was loss due to non-operation of other trading and investment speculations which are not expected to recur.  Also the income statement shows other safety net legal and other reserve allowance charges, worsening the present quarter income number for the future ones to look better.

The street seems to believe that the new CEO has made the financial picture upon his arrival worse than it actually is, and has built up substantial buffer of asset reserve, in addition to an aggressive trimming of operation costs, so that WB earnings and hence stock price will re-bounce rather faster as compared to its peers within the next few quarters' earning news.

Answer 6

The market had already discounted the bad news.  Their news wasn't as bad as expected, and coincident the government bailout talks were escalating, raising all bank stocks at the same time.

Check out the other bank stocks.

Answer 7

because there loss was not as much as was expected...o n top of that...Crude oil went down $3 dollars which also gave it a boost