Market Wipes Out Merrill Lynch (MER) Buyout Gains, Tomorrow Looks Worse

At one point Merrill Lynch (MER) was up to $22.68 because of Bank of America’s (BAC) buyout offer of $50 billion. Merrill closed at $17.05 on Friday.

Wall St. is now so afraid for the future of even the largest banks and brokerage houses that Merrill closed up only 4% at $17.76. Bank of America, after riding to Merrill’s rescue, closed down more than 21% to $26.55, giving up $24 billion in market cap.

Investors clearly have no confidence in any deal between or among financial companies. After AIG (AIG) received permission from New York State to move $20 billion from its subsidiaries to the parent, the insurance company’s stock moved down 60% to $5.25.

Just as unsettling was the movement in Washington Mutual (WM), the weakened savings and loan giant. It may be the next company in the sector that needs to be "rescued". By some estimates, this could cost the federal government $24 billion. Washington Mutual dropped to $1.99 from a 52-week high of $39.25 and closed near its low.

The DJIA and other major indexes plunged at the close. The Dow was off more than 500 points. The S&P 500 was off by a larger percentage–4.64%.

None of the news bodes well for tomorrow’s open.

Douglas A. McIntyre