Knight Lives! (At Least Until Monday): Financial Winner
Starke also said "it is possible though not likely that the capital shortfall can be remedied with internal resources. To solve the liquidity problem,
So Monday looks to be another day for extreme volatility for Knight Capital and its shareholders.
Tim Smith, executive director of SunGard's Astec Analytics business discussed the short interest in Knight Capital's shares and a possible short squeeze, saying on Friday that "there is more borrowing of Knight's shares being undertaken today, and the cost to borrow those securities has quadrupled in the past day to about 22% per annum, reflecting the difficulty people are having getting the shares. One of the reasons for that is some institutional selling that has triggered a number of recalls of earlier borrowed positions and sent some scrambling to find replacement shares," he said, which "could explain why the share price has gone up today, as the only way to cover these recalls has been to buy."
The broad indexes on Friday were all very strong, with 2% gains, after the Labor Department reported that nonfarm payrolls rose by 163,000 in July, which was way ahead of the 100,000 new jobs expected by economists polled by Thomson Reuters. This was the largest monthly employment growth number since February, although the unemployment rate held at 8.3%.
The KBW Bank Index (I:BKX) rose over 3% to close at 46.06, reversing four sessions of losses, so that the index was down only slightly from a week earlier. All 24 index components showed gains of over 1%, with Bank of America (BAC) rising 3.5% to close at $7.43, while Citigroup (C) was up 5%, closing at $27.40.
Among the largest U.S. bank holding companies, Morgan Stanley (MS) was winner, with shares rising 6% to close at $13.78. The shares have now declined 8% year-to-date, following a 44% decline during 2011.