We are suddenly seeing a meaningful drop in the major custodial banking stocks. State Street Corp. (NYSE: STT) and The Bank of New York Mellon Corporation (NYSE: BK) are the leaders in this group. Until recently, these institutions were spared from the carnage on Wall Street. There are some obvious reasons these companies have been hit today, although the severity of the price drop is noteworthy.
With fewer banks and brokerage firms, State Street and Bank of New York are facingpressure. There are some market rumors hurting their shares as well. Another issue is the potential limitations of short selling. Thenew SEC rules could impact the companies. The issue ofCALSTRS possibly eliminating its shares from the "available to borrow"pool potentially being copied by others is another trend to watch.
State Street is down 19% at $52.00. Five days ago this was a$72.00 stock. The Bank of New York Mellon Corporation plunged 10% to $29.53. This was at $40.00 last week before the market imploded.
What you are seeing is systemic risks and fears in the market spillingover into anything that has yet to be harmed. This looks no different,but as we have been saying: "The market is acting like an Alzheimer’spatient, so don’t allow yourself to be surprised by anything that itdoes."
Jon C. Ogg
September 18, 2008
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