Ackman raises exposure to Penney

Ackman raises exposure to Penney

Stock Market Predictions

(Global Markets) - Billionaire investor William Ackman's Pershing Square Capital Management said it entered into a kind of swap that has increased its exposure to department store chain J.C. Penney Co Inc's stock. (JCP.N)

Pershing Square, Penney's largest shareholder with 18.3 percent of common stock, or 39 million shares, said in filing on Friday it entered into cash-settled total return swaps that give it economic exposure to another 16.6 million Penney shares.

All in all, Pershing Square's total exposure is now 55.6 million shares, or 26.1 percent of Penney's outstanding shares. That is the maximum number of shares Ackman's firm can own in Pershing, according to its agreement with Penney.

The swaps were entered into on Thursday.

Penney shares were up 0.5 percent to $25.50 in late trading.

(Reporting by Phil Wahba in New York; editing by Andre Grenon)

Icahn drops push to unseat Clorox board

Icahn drops push to unseat Clorox board

Stock Market Predictions

(Global Markets) - Billionaire investor Carl Icahn abandoned his quest to take over the board of Clorox Co (CLX.N) on Friday, saying he lacked support from other major investors, sending its shares down almost 5 percent in extended trading.

Icahn, Clorox's biggest shareholder, last month nominated himself, his son and nine other people for election to the board at the company's next annual shareholder meeting.

That move came after Clorox directors twice rejected his earlier offers to buy the company.

"Several large shareholders may believe that now is not the best time to run that process, given the deteriorating conditions of the financial markets," Icahn said in a regulatory filing on Friday.

Beyond that, he said, Clorox's view is that Icahn's offer of $80 per share "substantially undervalues" the company.

Nevertheless, Icahn said he continues to believe that a sale is the best way to maximize shareholder value.

Icahn kicked off his proxy fight at Clorox on Aug 19, the day after he lost a battle to get board seats at another target, prescription drug maker Forest Laboratories (FRX.N).

The corporate raider-turned-activist, who is known to take on battles at several companies at the same time, lately has been no stranger to disappointment.

On August 30 he dumped his stake in Lions Gate Entertainment Corp (LGF.N), giving up on a lengthy battle for control of the film studio and producer of the television hit "Mad Men.

Shares in Clorox fell 4.9 percent to $66 in extended trading on Friday.

(Reporting by Phil Wahba in New York and Lisa Baertlein in Los Angeles; Editing by Andre Grenon)

FedEx pares 2012 outlook, shares hit 2-year low

FedEx pares 2012 outlook, shares hit 2-year low

Stock Market Predictions

(Global Markets) - FedEx Corp (FDX.N), the world's No. 2 package delivery company, cut its full-year profit outlook, citing high fuel costs and a weak global economy, sending its shares down as much as 11 percent to a two-year low.

Chief Executive Fred Smith said he did not expect economic conditions to improve much any time soon, although he did not expect the United States to slip back into recession.

"We expect sluggish economic growth will continue, largely due to a lack of confidence that U.S. and European policy makers will effectively address current economic challenges," Smith said on a conference call to discuss quarterly results.

The sour mood of the consumer, which is compelling companies around the world to squeeze costs and hold down inventories, remains the biggest drag on the economic growth that FedEx needs to give its business a boost, company executives said on the call on Thursday.

With inventories low, FedEx expects to benefit if there is an uptick in demand in the run-up to the holiday shopping season and retailers needed fast delivery. Much is also riding on robust online orders. But for now, things remain subdued.

"Our customers' hair is not on fire," said FedEx Chief Financial Officer Alan Graf. "They're just saying, you know, we're going to be steady as she goes, so it just feels completely different than it did back in 2008."

The sheer volume of goods moved by FedEx makes its shipment trends a bellwether for consumer demand and economic growth. The value of packages handled by FedEx's trucks and planes every year is equivalent to about 4 percent of U.S. gross domestic product and 1.5 percent of global GDP.

FedEx shares closed down 8.2 percent at $66.58, their biggest one-day fall in about 2-1/2 years and well below their year-high of $98.66 in July.

"The stock price action is clearly telling me that the market doesn't believe that FedEx can even do the low end of its guidance. They think it's that bad," said Kevin Sterling, an analyst at BB&T Capital Markets.

Donald Porter, an analyst at Dalton, Greiner, Hartman, Maher & Co, said the stock was cheap, and that it would be a good buy if the economy was just going through a slow patch.

But if there's a recession "I would say you wouldn't want to own it," said Porter, whose firm holds shares in rival United Parcel Service (UPS.N).

FedEx, which is also being hurt by a slowdown in international trade reported earnings of $1.46 per share, just beating the average analyst estimate of $1.45, according to Thomson Global Markets I/B/E/S/. (For a graphic, see r.reuters.com/kys83s )

ASIAN VOLUMES DOWN

To help counter falling volumes in the Express division, its biggest, FedEx said it would raise shipping rates by a net 3.9 percent on average for U.S. domestic, U.S. export and U.S. import services from January 2.

The company so far has had little resistance to rate increases, the latest of which went into effect this month.

Memphis, Tennessee-based FedEx reiterated its $4.2 billion capital expenditure plan for the year ending next May. The company is considering buying about 50 wide-body freighters from Boeing Co (BA.N) and Airbus (EAD.PA) to update its fleet to more fuel-efficient models.

At FedEx Express, which represents more than 60 percent of total revenue, domestic revenue per package rose 13 percent in the three months ended August 31, mainly due to higher fuel surcharges and increased weight per package. Average daily package volume dropped 3 percent.

Volume fell 4 percent in the division's international unit, mainly due to a decline in traffic from Asia. Revenue per package grew 16 percent, helped by favorable exchange rates.

FedEx is the world's biggest air cargo carrier, a fact that Fred Labatt, director of equity research at South Texas Money Management, said made it more vulnerable than UPS to weakness in international trade.

"The stock is going to be more sensitive than UPS, which has a lot more ground and less air," he said. "On the other hand, the yields were better pretty much across the board in all the segments, which means they're getting pricing and the company's doing a really good job of managing their costs," said Labatt, whose firm holds FedEx shares.

FedEx said fiscal first-quarter profit, which slightly beat forecasts, rose to $464 million, or $1.46 per share, from $380 million, or $1.20 per share, a year ago. Analysts, on average, had expected a profit of $1.45 per share.

The company cut its forecast for earnings for the year to May 2012 to $6.25 to $6.75 per share from its June estimate of between $6.35 and $6.85.

Revenue rose 11 percent to $10.52 billion from $9.46 billion a year earlier. That was above the average forecast of $10.32 billion.

With the stock down about 30 percent this year, FedEx said it planned to buy back 5.7 million shares under its existing repurchase authorization.

The Dow Jones Transportation average .DJT has dropped about 19 percent this year while UPS shares have fallen about 14 percent.

UPS, the world's biggest package delivery company, last week affirmed its call for record earnings in 2011, downplaying the likelihood of a double-dip recession.

(Reporting by Lynn Adler in New York, editing by Dave Zimmerman, Maureen Bavdek and Matthew Lewis and Ted Kerr)

Alibaba.com boosted by private equity investment

Alibaba.com boosted by private equity investment

Stock Market Predictions

SHANGHAI (Global Markets) - Private equity firms looking to invest into Alibaba Group have relieved pressure on Chairman Jack Ma to stage a speedy IPO by allowing a way for employees to sell their shares to willing buyers.

Shares of Alibaba.com, the only listed unit of the group, bucked a selloff in the broader market to close 2.8 percent higher after three private equity firms said they were looking to buy shares in Alibaba Group.

Yunfeng Capital, Silver Lake and DST Global said on Thursday they will buy shares in China's largest e-commerce group by leading a tender offer for employee shareholders, option holders and certain other shareholders of Alibaba Group.

Yunfeng Capital was co-founded by Ma.

The transaction would give Alibaba an enterprise valuation of $32 billion, the tech blog AllThingsD said, adding the group would get a stake of just under 5 percent if the offer is fully subscribed.

"They (Alibaba employees) are anxious for some sort of IPO, so it's wise of Jack Ma to give these guys some liquidity," said Michael Clendenin, managing director of Shanghai-based technology consultancy RedTech Advisors.

"This doesn't add investment to Alibaba because Alibaba doesn't need it. It's just a swap that certainly takes pressure off IPO in the near term."

The move may also help Ma in his quest to buy back a portion of all of Yahoo Inc's stake in his company as Silver Lake was reportedly considering a bid for Yahoo.

"Silver Lake is looking at Yahoo as a buyout target so to be closer to Jack and really see what he's thinking makes a lot of sense. They may want to know what Jack be willing to pay for a part of Yahoo's stake in Alibaba," Clendenin said.

It was reported earlier this month that Silver Lake is considering a bid for Yahoo that would see Silver Lake sell of Yahoo's Asian assets.

Yahoo is worth about $17 billion, with much of that ascribed to its roughly 40 percent stake in Alibaba Group, and has had a tumultuous relationship with Ma under its former chief executive Carol Bartz.

Japanese technology company Softbank Corp also owns about 30 percent of Alibaba Group.

Ma said the latest move was aimed at increasing liquidity options for employees.

"This liquidity program will allow our people to focus on growing our business and continuing to create value," he said in a statement.

"We believe the high-quality investors making commitments to this important program share our mission and philosophy, and we welcome them as shareholders of the company."

Yahoo will not be selling shares in the offer, AllThingsD said.

Chinese sportswear maker Dongxiang Group will invest $100 million in Yunfeng Capital, while Chinese online game developer Giant Interactive will also invest $50 million into Yunfeng Capital.

Singapore-based investment firm Temasek, a shareholder in Alibaba Group, is also taking part in the offer.

Alibaba Group is also the parent company of Taobao Mall, Taobao and AliCloud.

Alibaba.com shares rose as much as nearly 7 percent on Friday before closing up 2.8 percent. The broader market fell 1.4 percent.

(Additional reporting by Denny Thomas and Farah Master in HONG KONG; Editing by Anshuman Daga)

China's XCMG delays $1.2 bln Hong Kong IPO: IFR

China's XCMG delays $1.2 bln Hong Kong IPO: IFR

Stock Market Predictions

HONG KONG (Global Markets) - China's XCMG Construction Machinery Co Ltd (000425.SZ) has postponed its planned $1.2 billion Hong Kong stock offering, IFR reported on Saturday, citing four sources with direct knowledge of the matter.

XCMG's decision came only a few days after bigger rival Sany Heavy Industry Co Ltd (600031.SS) pulled its $3.3 billion Hong Kong share offer due to market turmoil.

IFR did not indicate a reason for the delay. Bookbuilding of the offering was originally scheduled to start on September 26, the report said.

The original size of the IPO was $1.5 billion. XCMG recently added six more banks to the underwriting team, taking the total number of banks on the deal to 12, according to IFR.

ABC International, BOC International, BoCom International, Essence Securities, Goldman Sachs Group Inc (GS.N) and ICBC International will join BNP Paribas SA (BNPP.PA), China International Credit Corp, Credit Suisse Group AG (CSGN.VX), HSBC Holdings Plc (0005.HK)(HSBA.L), Macquarie Group Ltd (MQG.AX) and Morgan Stanley (MS.N) to arrange the float.

On Thursday, Sany Heavy delayed a planned up to $3.3 billion Hong Kong offering. Xiao Nan Guo Restaurants Holdings also decided to call off its $95 million Hong Kong IPO because of market volatility.

(Reporting by Fiona Lau; Writing by Leonora Walet; Editing by Sugita Katyal)

New UBS boss seeks fresh start after trading scandal

New UBS boss seeks fresh start after trading scandal

Stock Market Predictions

ZURICH (Global Markets) - The new interim boss of UBS faced a daunting task on Sunday as he tries to get the Swiss bank back on its feet after Oswald Gruebel quit as chief executive over the $2.3 billion loss it ran up in alleged rogue trading.

Sergio Ermotti said on Saturday the scandal had revealed a risk exposure that was "totally unacceptable" and his first priorities would be to review the bank's controls and conclude an internal investigation into the losses.

A 51 year-old from Switzerland's Italian-speaking region of Ticino, Ermotti was being groomed as a possible successor at the helm since he joined UBS as head of Europe, Middle East and Africa in April from UniCredit.

"We are aware that we are facing turbulent times externally and this latest incident is only adding much more necessity for us to react. But let's not forget that UBS is one of the best capitalized banks worldwide," he told journalists.

Gruebel, a 67-year-old banking veteran who helped turn around rival Credit Suisse last decade, was brought out of retirement to try to revamp UBS after it almost collapsed in 2008 under the weight of more than $50 billion lost on toxic assets.

UBS shares fell more than 10 percent since the news broke on September 15, trading at their lowest level since shortly after Gruebel took over in early 2009, but they rose 4.8 percent on Friday on hopes the board would agree a major restructuring.

Ermotti, who Chairman Kaspar Villiger said was a strong candidate to replace Gruebel permanently, said an internal investigation of what went wrong bank should conclude in 10 to 14 days although UBS might not be able to disclose its findings, pending external probes.

OPPORTUNITY OUT OF DISASTER

The board asked Ermotti to speed up a scaling back of the investment bank, which he said would be detailed at an investor day already planned for November 17 in New York.

Villiger said he had no doubts about the future of investment bank head Carsten Kengeter, whose fate had also hung in the balance, saying he and his team had done an "excellent job" to limit losses from the unauthorized trades.

Villiger declined to comment on whether Kengeter could still be a candidate to take over as CEO, saying only the board was looking at both internal and external candidates and should decide on a permanent replacement within six months.

UBS had already said in August it would axe 3,500 more jobs to shave 2 billion Swiss francs off annual costs, with almost half from the investment bank, which had grown to almost 18,000 staff as Kengeter tried to rebuild the battered franchise.

(Additional reporting by Steve Slater in London; Editing by John Stonestreet)

HP names Whitman CEO, Apotheker out

HP names Whitman CEO, Apotheker out

Stock Market Predictions

SAN FRANCISCO (Global Markets) - Hewlett-Packard Co named former eBay Inc Chief Executive Meg Whitman its president and CEO, replacing the harshly criticized Leo Apotheker in a bid to restore investor confidence in the iconic Silicon Valley company.

The decision was made without a formal CEO search and piled renewed criticism on the board, which investors have blamed -- at least in part -- for the storied company's recent missteps.

Chairman Ray Lane, who becomes Executive Chairman with a mandate to help Whitman run a sprawling $120 billion empire with over 300,000 employees, tried to assure disillusioned investors by saying HP is making a fresh start with a new CEO and -- crucially -- a virtually revamped board of directors.

Lane vowed that the days of board dysfunction -- the wire-tapping scandal, the firing of Mark Hurd after a sexual harassment probe, and the hiring of Apotheker -- were over.

The board works well together, he said.

"It's amazing how they challenge the management team, challenge each other," Lane said in an interview. "They are smart, they bring great insight to the table and I think we make good decisions."

Analysts had speculated that Apotheker's departure might presage a backtracking on major decisions taken during his 11-month term and announced -- back to back in haphazard fashion -- on August 18. But HP reassured investors on a conference call the board will not reverse course.

"I don't think we ought to be going back in history. This board did not select Leo. This is not the board that was around for pretexting," Lane said, referring to the scandal in which HP hired investigators who impersonated its board members and journalists to obtain their phone records.

"This is not the board that fired Mark Hurd," he noted. "We are embarrassed about the communications of decisions that could have been done much better. But we carefully considered the decisions made. It is our operating execution that needs to improve."

Whitman, an Internet retail expert with a mixed track record, is not an obvious choice to revive HP, analysts said. The failed California gubernatorial candidate transformed eBay from a few dozen employees in 1998 into a global Internet retail powerhouse, but the final years of her reign were marked by sputtering growth, intensifying Wall Street criticism and a string of unwise acquisitions, including of Skype.

She has been an HP director about eight months. While her elevation surprised many with its seeming hastiness -- for the second time, internal candidates such as enterprise chief David Donatelli were passed over -- Apotheker's ejection had been a matter of time.

He becomes the third straight HP CEO shown the door.

"Some might be saying maybe Meg Whitman isn't the right person, either. She's not a hardware person," said Auriga analyst Kevin Hunt. But HP "just needs someone to set the direction."

Defending her track record, Whitman said as head of eBay she had been a major purchaser of HP enterprise products.

"So I actually understand this space relatively well," she told Global Markets in an interview. "What I bring to this table is leadership, management skills, strategic vision, communications and an execution orientation to deliver the result."

Whitman said HP remained committed to completing a review of its PC division before the year ends, and expected to close the pricey $12 billion acquisition of British software maker Autonomy Corp Plc as planned.

HP's shares closed down 4.8 percent at $22.80, wiping out much of Wednesday's 6.6 percent gain.

"We would view any decision not to conduct a comprehensive search of internal and external candidates for a permanent CEO role as unsatisfactory and unnecessarily hasty," Sanford Bernstein analyst Toni Sacconaghi, who has been openly critical of HP's board, wrote in a note earlier on Thursday.

Lane, however, fired back by saying Whitman was handpicked for her communication, people and execution skills, while Apotheker fell short on several fronts.

Lane himself will also be taking on a bigger role in the company as executive chairman.

"I am here to help Meg execute on the business," Lane said. "I will be standing behind her and I will be working in areas that maybe I can help with a little more than she can do herself."

QUESTIONS?

In less than a year on the job, Apotheker, formerly SAP AG CEO, slashed HP's forecasts for three straight quarters and struggled to reverse a 50 percent plunge in the share price.

The storied Silicon Valley computer maker is fighting to restore its crumbling credibility. Whitman has to galvanize growth at a company that gets more than a third of its revenue from a slowing European economy, and is struggling to offset sliding PC revenue with services and software.

"We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead," said Lane.

Whitman's record at eBay came under scrutiny during her failed campaign for California's governorship. Analysts question whether her stewardship of eBay prepared her to steer a sprawling enterprise and computer giant.

The billionaire is credited with catapulting eBay into the upper echelons of a then-nascent e-commerce arena, and taking it public. But critics note she pushed hard to acquire Internet telephony service Skype, beginning a long and ultimately fruitless attempt to wring value from it. EBay eventually unloaded it, and it ended up with Microsoft Corp.

Her successor, John Donahoe, spent years engineering a turnaround and trying to rekindle stalled growth.

"While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest Internet companies, we think an ideal candidate for HP should have extensive experience in the enterprise market," Stern Agee analyst Shaw Wu said in a client note.

Better choices would include HP enterprise chief Dave Donatelli and PC head Todd Bradley, two names that had also made the rounds in Silicon Valley for the top job after Mark Hurd's ouster in August 2010, he added.

On a more personal level, opponents and media on the campaign trail last year raised questions about Whitman's fierce temper and imperious manner with employees, and even about her integrity after it emerged that the wealthy former CEO had employed an illegal alien maid.

Whitman has her work cut out to try and turn the lumbering ship around. On Thursday, Chief Financial Officer Cathie Lesjak warned that HP's revenue outlook remained uncertain with Europe still soft and public spending weak.

But she made it clear it was imperative to speed up discussions around the personal systems group, or PC division.

"This decision is not like fine wine. It's not going to get better with age," Whitman said. "I am going into this with an open mind."

(Writing by Edwin Chan; Editing by Gunna Dickson, Gerald E. McCormick and Richard Chang)

BofA sued by shareholder over $10 billion AIG loss

BofA sued by shareholder over $10 billion AIG loss

Stock Market Predictions

NEW YORK (Global Markets) - A Bank of America Corp (BAC.N) shareholder sued the bank on Friday for what he said was a failure to disclose it potentially owes more than $10 billion to American International Group Inc (AIG.N) in connection with mortgage-backed securities.

The lawsuit, filed in U.S. District Court in Manhattan, seeks class action status on behalf of purchasers of Bank of America stock between February 25 and August 5 this year.

AIG, which was bailed out by the government in the 2008 financial crisis, suffered losses of more than $10 billion from the securities, known as RMBS, between 2005 and 2007. The losses occurred after Bank of America and two companies it bought -- Countrywide Financial Corp and Merrill Lynch -- and subsidiaries sold AIG more than $28 billion in RMBS.

"Throughout the class period, defendants repeatedly informed investors about the claims of other entities for RMBS losses but not about the massive losses suffered by AIG," the lawsuit said.

Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, said he had not seen the lawsuit and declined to comment.

The court document said the shareholder losses occurred on August 8 as Bank of America's stock dropped more than 20 percent to $6.51 per share from $8.17 per share after AIG sued the bank in New York state court seeking to recover the RMBS losses.

"This decrease was a result of the artificial inflation caused by the defendants' misleading statements coming out of the price," Friday's lawsuit said.

In a footnote, the court document adds that the plaintiff, shareholder David Lawrence, "asserts only that BofA should have disclosed AIG's losses and potential claims to investors and takes no position on whether those claims will ultimately be found to have merit."

Lawrence asks the court to declare the lawsuit a class action under anti-fraud provisions of federal securities law and seeks unspecified damages for all members of the class.

The case is David Lawrence et al v Bank of America Corp, U.S. District Court for the Southern District of New York, No. 11-6678.

(Editing by Steve Orlofsky)

Morgan Stanley rallies, analysts defend on France

Morgan Stanley rallies, analysts defend on France

Stock Market Predictions

(Global Markets) - Morgan Stanley (MS.N) shares rallied on Friday, despite continued weakness in global markets, as analysts said that fears about its exposure to French banks were overblown and that the bank was prepared to manage risk.

At midday the stock had given up some early gains but was still up 3.7 percent, far outstripping the broader market. In the previous five trading sessions, the bank lost more than 21 percent of its value, reducing its market capitalization by more than $6.8 billion.

Other financial stocks also rose, after days of being slammed by the weak financial outlook and market malaise.

The KBW Bank Index .BKX rose 1.5 percent, led by a nearly 3.8 percent gain for Bank of America Corp (BAC.N). Most members of the broker-dealer index .XBD also rallied, led by Morgan Stanley and by a 4.3 percent gain for Jefferies Group Inc (JEF.N).

But even with the rally, there were signs the market was still not fully confident in Morgan Stanley's strength.

The cost to insure Morgan Stanley's debt in the credit default swap market jumped on Friday even as swaps on other U.S. banks came off their highs, with the cost to insure the company's bonds rising above that of Bank of America bonds for the first time since late August.

CDS costs to insure Morgan Stanley's bonds for five years were last up 39 basis points to 438 basis points, the highest level since March 2009, according to Markit. That means it would cost $438,000 per year to insure $10 million in debt for five years.

FRENCH FEARS

Like many other banks, Morgan Stanley has been hurt by fears of weak third-quarter performance, a gloomy economic outlook and a Federal Reserve plan to lower long-term interest rates that could compress margins.

The pressure increased Thursday with a post on the well-known finance blog "Zero Hedge" that said Morgan Stanley was at serious risk because of its exposure to French banks.

The blog said Morgan Stanley's French exposure was greater than its market capitalization and about two-thirds of its entire book value. French banks are some of the biggest victims of the panic in recent weeks about Greek debt and the effect a default would have on Europe.

Wall Street analysts were quick to rush to Morgan Stanley's defense. Bernstein Research's Brad Hintz -- himself a former treasurer of the company -- said Friday that Morgan Stanley's total exposure to France was probably less than $2 billion.

"We believe Morgan Stanley's risk management staff and its trading units are fully aware of the highly publicized risks emanating from Europe and warnings about the firm's potential exposure to a European Sovereign crisis," Hintz said in a note. "There is solid evidence that shows Morgan Stanley has been taking action to limit risk in preparation for potentially difficult market conditions ahead."

The Wall Street Journal reported that Credit Suisse also defended Morgan Stanley's French position in a note late Thursday, saying any risk to the bank in the euro zone was not a surprise and would be manageable.

The market also shrugged off an estimate change on Morgan Stanley. JMP Securities analyst David Trone cut his third-quarter profit forecast by 10 percent on expected losses in the bank's bond portfolio.

(Reporting by Ben Berkowitz in New York, additional reporting by Karen Brettell; Editing by Gerald E. McCormick and John Wallace)

Banks, brokers plunge as Twist reality sinks in

Banks, brokers plunge as Twist reality sinks in

Stock Market Predictions

NEW YORK (Global Markets) - Shares in Citigroup, Morgan Stanley and other big banks fell to their lowest levels in more than two-and-a-half years over growing concerns about their profitability in a deteriorating global economy.

Wednesday's bleak economic outlook from the Federal Reserve, combined with its plan to lower long-term interest rates, raised fears that banks and brokerages are at risk for a prolonged period of depressed earnings.

The Fed's aim with Operation Twist is to make credit cheaper for consumers, thereby stimulating borrowing and the economy. The problem is that banks and brokerage firms generally borrow short-term and lend long-term, meaning that if Twist works they are squeezed.

"Nearly every line is being marked down from our prior forecasts, which were not particularly optimistic to begin with," Barclays banking analyst Roger Freeman said in a note on Thursday.

In afternoon trading, Goldman Sachs shares fell 5.5 percent to $92.48, their lowest level in two-and-a-half years. On Wednesday the stock closed below $100 for the first time since March 2009.

Morgan Stanley shares were down 6.3 percent to $12.95, at one point touching their lowest level since December 2008. Since its mid-February peak, the stock has lost 59 percent of its value.

Goldman has fared a little bit better, but not much. The stock is down 13 percent in the last five sessions and down 44 percent from its mid-January peak.

Banks have been hammered in recent weeks by deepening fears about slowing markets. Barclays analysts said on Thursday they expect Goldman to report a third-quarter loss, the second in its history.

Broader markets sank as well, with the Dow down 373 points at mid-afternoon. Shares in Citi fell 7.1 percent to a March 2009 low, and J.P. Morgan Chase dropped 4.7 percent to an April 2009 low. Bank of America fell 5 percent and Wells Fargo dropped 2.7 percent.

IN THE LINE OF FIRE

Brokers may fare little better, analysts said. Many brokers are having to waive fees on mutual funds, given their limited returns, while others are also getting hurt by a squeeze on margin lending.

"Generally speaking, earnings growth for (brokers) is at risk to a prolonged, low-rate environment," Bernstein Research analyst Brad Hintz said on Thursday.

Hintz singled out three names at risk -- Charles Schwab, TD Ameritrade and LPL -- and cut 2012 earnings estimates for all three by at least 10 percent.

Schwab shares fell 2 percent in afternoon trading, while TD Ameritrade fell 1.1 percent and LPL dipped 0.8 percent.

Banks and brokers are not the only ones that are going to suffer the effects of Twist. Insurance companies and pension funds are also in the line of fire.

Life insurers rely on strong rates of return to meet their long-term obligations, both to insurance customers and to retirees who rely on annuities for income. Some actuaries say insurers may have to rethink their business models if rates stay low for years.

The nation's largest pension funds, already being battered by equity market weakness, will also be hurt by persistently low bond yields. The 100 largest pension plans already face an asset shortfall relative to obligations, which could get much worse in the next two years.

One brighter spot -- or at least a less-dark spot -- may be retail banks such as Bank of America and Wells Fargo, among others. Though they have lamented the low-interest-rate environment like everyone else, analysts say their profile puts them at somewhat less risk.

"Where banks live is the 2-to-5-year period. The margin isn't driven primarily by the long end of the curve," said Jefferson Harralson, bank analyst with Keefe, Bruyette & Woods.

But even so, Harralson said, "the overall rate environment is a really tough one right now, and if you layer Operation Twist on top of that, it becomes tough to make decent spreads."

(Reporting by Ben Berkowitz in New York; Additional reporting by Joe Rauch in Charlotte; Editing by John Wallace and Tim Dobbyn)