Reply #10: Investors brace for more bad bank news [View All]

NEW YORK - The stock market this week is hoping for signs that the economy is surviving the problems in the financial sector — and that the Federal Reserve will come to the rescue if it's not.

Investors are slowly getting a clearer picture of how much in risky and deteriorating debt securities the world's major financial institutions are holding, and they don't like what they see.

Wall Street already expects banks' portfolios to lose at least $20 billion in the fourth quarter, after announcements of anticipated writedowns of mortgage-backed securities and other debt instruments by such financial institutions as Citigroup Inc., Morgan Stanley and Wachovia Corp.

Investors have been bracing for fourth-quarter writedowns for a while, but the amount was larger than many were prepared to hear. As a result, volatility has returned to virtually all corners of Wall Street.

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The combination of shaky financial markets and inflationary triggers has worried investors that the Fed's hands are tied. An interest rate cut could send the dollar down even further, but keeping rates where they are might translate to even wider losses for the world's major financial institutions.

http://news.yahoo.com/s/ap/20071111/ap_on_bi_ge/wall_street_week_ahead