Ratings agencies have tremendous power in the financial markets because their ratings determine if a certain credit is "own-able" by funds, depending on their covenants. For example, low-risk pension funds can't own poorly graded credit simply because it increases the likelihood of losing money. When ratings agencies change their position on companies or sectors, the market listens. A perfect example of this was the recent subprime fall that resulted from S&P announcing it could downgrade some of the credit from the group.

Now the opposite has occurred -- Fitch announced that it has positive outlook for Doral Financial Corp. (NYSE: DRL). Fitch justified its optimistic outlook for Doral by mentioning the company's sale of a 90% stake in the company to Bear Stearns (NYSE: BSC) Merchant Banking, among other things.

Even though this upgrade was on the company's debt, the stock traded up as well. I think Doral is too speculative to play with, and the future of this company, especially the stock, is extremely up in the air at this point.

Fitch upgrade sends Doral flying originally appeared on BloggingStocks on Sat, 21 Jul 2007 09:40:00 EST. Please see our terms for use of feeds.