As Decline Continues, Novastart Fights for Survival and Starbucks a Buy on Weakness

Bearish sentiment gained strength for the second straight day in the North American markets. The Dow closed down over 100 points, and is down about 250 points from highs seen earlier this week. The Nasdaq and The S&P indices followed the Dow's 1% loss with the similar percentage losses.

The selling was broad Thursday led by energy and the financials. Big US banks continued declining, with the major names dropping between 3 and 4%. The credit crisis reared its head again as NovaStart Financial (NFI) dropped its REIT (Investment Trust) status because it could not afford to pay out its required yearly dividend.

The ramifications of this move are not clear yet as in prior reports the company was trying to shift its dividend from cash into preferred shares and try to drop its REIT status for next year. The problems with NovaStar are clear and Investors headed for the exits. The shares dropped over 50% and after hours fell below $2/share. Will the company have enough resources to continue operations while the market for its services is so fragile?

Investors seem to not have much hope. The company's share price was over $30 late last year, actually $120/share if you include the recent 1 for 4 reverse split. With a market cap of under $20 million it'll be interesting to see if the company has any flexibility whatsoever to try and survive through trying times. Other risky loan players such as Country Wide Financial (CFC) and Washington Mutual (WM), were down 8% and 4% respectively on renewed fears.

Starbucks (SBUX) was in focus after hours as it reported its quarter with mixed results. The premium coffee provider delivered earnings ($0.21/share) and revenue numbers ($2.45Billion) in-line with forecasts, but the company lowered its new store openings plan for next year and remained cautious with its outlook. The stock was hit 7% after hours, but is a great North American brand that is expanding furiously Internationally. The stock is down 45% from its 52-week high, and now it's worth a closer look after tonight's after market decline.

Disclosure: Author holds no positions in the stocks mentioned