E*Trade shellacked; AtheroGenics whacked; Suntech, SunPower smacked; AMR, Continental soar

By Evan Weinberger

New York, Nov. 12 - E*Trade Financial Corp. was the big mover of the day Monday on Wall Street. Its move was down, way down after announcing that subprime investments were coming home to roost.

AtheroGenics Inc. joined that speeding elevator on its way down as the pharmaceuticals firm announced a setback in one of its drugs undergoing tests.

Two popular solar power names, Suntech Power Holdings Co. Ltd. and SunPower Corp., took it on the chin Monday as rumors surrounding a new energy bill in Congress swirled.

Airlines, led by AMR Corp. and Continental Airlines Inc., were winners on the day as oil prices eased. The Organization of Petroleum Exporting Countries floated the idea of increasing oil output Monday.

iStar Financial Inc. was up as financial stocks, E*Trade aside, rebounded a bit Monday.

Volume on the stock markets was light because of the Veterans Day holiday Monday, and the markets' moves were volatile. Falling oil prices and some profit taking buoyed markets early, but that rise collapsed late. "A lot of stuff looked to be up a lot stronger in the beginning of the day, but there was a drop late," a desk analyst said. "Oil stayed down, so those stocks opened down and stayed down. Airlines opened up and stayed up."

In the end, the Dow Jones Industrial Average posted a 55.19 point, or 0.42%, loss to 12,987.55. The index had peaked above 100 points up during the day.

The Nasdaq continued its difficult stretch, losing 43.81 points, or 1.67%, to close at 2,584.13.

The Standard & Poor's 500 closed at 1,439.18, a loss of 14.52 points, or an even 1%.

No new issues priced in the United States Monday.

E*Trade flattened

New York-based online brokerage E*Trade announced late Friday that it would take an unspecified writedown on its $3 billion portfolio in mortgage-backed collateralized debt obligations and securities. Those writedowns, E*Trade said in a statement Friday, would continue into the fourth quarter. The company stopped giving earnings estimates for the rest of the year.

In a letter to shareholders, E*Trade president and chief operating officer R. Jarrett Lilien said the firm could handle about $1 billion in writedowns and was "well capitalized."

And in announcing the firm's third-quarter results, he emphasized the 4% growth in its client base. "We continue to see momentum with new and existing customers," Lilien said in a statement. "E*Trade's value proposition continues to resonate with customers in these very challenging times, and the result is that solid customer growth and engagement continues."

A Citigroup equity analyst wasn't buying that assessment and downgraded E*Trade to sell. Other analysts were not quite as gloomy, but the word bankruptcy is starting to be thrown around for E*Trade.

E*Trade's 6.125% common equity units due Nov. 18, 2008 (Nasdaq: ETFCP) lost just under $7, or 53.83%, to close at $6. E*Trade common stock (Nasdaq: ETFC) tumbled $5.04, or 58.67%, to $3.55.

Where others are seeing disaster, however, some are seeing opportunity. "There is tremendous value in their brokerage division, which is growing, and I see them making it and the preferred an excellent way of doing so," a trader said.

iStar, other financials up

Other financial firms saw their stocks rise Monday.

On the convertibles front, New York-based commercial real estate investment trust iStar Financial, which focuses on financing projects, saw its Libor plus 50 bps convertible senior floating-rate notes due Oct. 1, 2012 close at 93.23 versus a closing stock price of $30.64. They closed Friday at 92.07 versus a stock price of $29.80.

Stock in iStar (NYSE: SFI) gained 84 cents, or 2.82%, on Monday.

AtheroGenics drops

Alpharetta, Ga.-based AtheroGenics' stock and convertibles crumbled after the pharmaceuticals firm announced that it had to pull a dosage of a potential diabetes drug from testing due to liver side effects.

The company had to pull its 300 milligram dose of AGI-1067, an antioxidant and anti-inflammatory drug candidate, from testing for its uses against diabetes. Two smaller doses of the drugs are still being tested.

The negative test results had predictable side effects on the company.

AtheroGenics' 1.5% convertible senior unsecured notes due Feb. 1, 2012 closed Monday at 17 versus a stock price of $1. They closed Friday at 23.67 versus a stock price of $1.40.

Stock in AtheroGenics (Nasdaq: AGIX) lost 40 cents, or 28.57%, on the day.

Solar blocked in Congress?

The Solar Energy Industries Association, solar energy's trade group, posted on its web site Friday that the new energy bill winding its way through Congress would eliminate incentives for the development and use of solar energy.

The industry vowed to fight that move.

Solar energy stocks crumbled Monday, and the convertibles followed suit.

Wuxi, China-based photovoltaic cell producer Suntech Power saw its 0.25% convertible senior notes due Feb. 15, 2012 close at 132.608 versus a closing stock price of $56.36. They closed Friday at 142.89 versus a stock price of $61.55.

Suntech stock (NYSE: STP) lost $5.19, or 8.43%, on Monday.

San Jose, Calif.-based SunPower saw its 0.75% convertible senior debentures due Aug. 1, 2027 close Monday at 146.601 versus a stock price of $109.88. They closed Friday at 164.748 versus a stock price of $128.70.

The solar power components producer's 1.25% convertible senior notes due Feb. 15, 2027 closed Monday at 200.822 versus a stock price of $109.88 after finishing Friday at 232.836 versus a stock price of $128.70.

SunPower stock (Nasdaq: SPWR) fell $18.82, or 14.62%, on the day.

Falling oil helps airlines soar

Falling oil prices mean falling jet fuel prices. And falling jet fuel prices mean soaring profits for airlines. That was reflected in stocks and convertibles issued by air carriers Monday.

Fort Worth, Texas-based AMR, the parent company of American Airlines, saw its 4.5% convertible senior notes due Feb. 15, 2024 close Monday at 117.705 versus a closing stock price of $21.32. The convertibles closed Friday at 115.646 versus a stock price of $20.42.

The company's 4.25% convertible senior notes due Sept. 23, 2023 closed Monday at 132.962 versus a stock price of $21.32. They closed Friday at 130.871 versus a stock price of $20.42.

AMR stock (NYSE: AMR) gained 90 cents, or 4.41%, on Monday.

Houston-based Continental Airlines had its 5% convertible senior notes due June 15, 2023 close Monday at 160.813 versus a stock price of $28.91 after finishing Friday at 155.58 versus a stock price of $27.78.

Continental stock (NYSE: CAL) added $1.13, or 4.07%, on the day.

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