Morning Market Report

After the market closed on Friday, the FDIC closed down Colonial Bank.

In its fifth-largest bank failures in the US history, Colonial BancGroup Inc., Montgomery, Alabama, was seized by regulators on Friday.

Branch Banking and Trust (BB&T), Winston-Salem, North Carolina, will assume all of the Deposits of Colonial Bank.

Four other banks also went under on Friday, the largest of which was Las Vegas-based Community Bank of Nevada, which had total assets of $1.5 billion. The others were two smaller institutions in Arizona and one in Pittsburgh.

Now, the closure of Colonial has a lot to do with the closure of mortgage company Taylor Bean and Whitaker.

TAYLOR, BEAN & WHITAKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES. TBW HAS UNSUCCESSFULLY SOUGHT TO HAVE THE TERMINATION/SUSPENSION DECISIONS OF EACH OF THOSE AGENCIES REVERSED.

Now TB&W's troubles started when their warehouse line from Colonial was shut off in June. TB&W tried to actually buy Colonial at one point in the summer. Things went downhill from there for TB&W and they were shut down earlier in the month. TB&W was the third biggest FHA lender until its closure. The closure of both are yet more evidence that the mortgage market is anything but settled.

Meanwhile, stock indices were all pointing to significantly lower openings this morning. All three indices look to be down about 2% at the open. This comes as the Dow snapped a four week winning streak last week. The weaker equities are showing themselves in bonds. All U.S. Treasury bonds are looking better at the open. The ten year U.S. Treasury bond is now trading at 3.49%. That's about three tenths the bond has shaved in about a week and a half. Meanwhile, the yield spread between the 2 and 10 year has also tightened significantly. That spread is 2.37%. The yield spread measures the chances of future inflation. While that spread has tightened, it remains near all time highs. Meanwhile, oil has come down dramatically over the last couple days and that continues. Oil is now trading at just above $66 a barrel at $66.17 a barrel.

All major indices fell this morning. In the Far East, the Hang Seng in China was down 3.62%, the NIKKEI in Japan was down 3.1%, and the Straits Time Index in Singapore was down 3.25%. In Europe, the FTSE in London was down 1.51%, the DAX in Germany was down 1.78%, and the Spanish Index was down 2.65%.

Meanwhile, the Dollar is mixed this morning. It's up by .87% against the Euro, it's up by 1.31% against the British Pound, but down by .33% against the Japanese Yen.

Lowes announced earnings this morning and the earnings disappointed.

Profit at Lowe's, the second-largest home improvement retailer in the US, fell 19 percent in the second quarter, missing analysts' expectations, the company said Monday.

Shares of Lowe's dropped more than 10%, however it's not clear that Lowe's earnings is what's driving overall market weakness.