Wall Street Mixed On Bear Stearns Collapse

Seesaw Trading As Markets Digest JPMorgan Chase Buyout Of Investment Bank

(CBS/AP)  Wall Street ended a temperamental session widely mixed Monday after investors grappled with JPMorgan Chase & Co.'s government-backed buyout of the stricken investment bank Bear Stearns & Co.

The Dow Jones industrials recovered from an initial drop of nearly 200 points to finish up about 21 points. The broader Standard & Poor's 500 and Nasdaq composite indexes ended lower as investors bailed out of investment banks and small-cap stocks and fled instead to large companies apt to be reliable during a weak economy.

"You move to the defensive names in times of market uncertainty - safer, consumer names," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

The buyout of Bear Stearns was certainly more appealing than the alternative: letting the investment bank collapse and causing huge losses for anyone linked to it. And some unprecedented moves by the Federal Reserve gave investors a bit of solace on what many predicted would be a day of precipitous losses in the stock market.

Besides supporting the buyout, the Fed lowered the rate it charges to loan directly to banks by a quarter-point on Sunday night - two days before its scheduled meeting Tuesday. The central bank also set up a lending option for firms, including many non-bank financial services firms, to secure short-term loans for a broad range of collateral.

The Fed appears to be pledging to do everything in its power to keep the credit crisis from decimating the financial industry and the economy. Policy makers at the central bank are expected to reduce the target fed funds rate - the rate banks charge each other for overnight loans - by at least a half-point on Tuesday, and perhaps even a full point.

But the market remained extremely volatile. The sale of Bear Stearns - at a minuscule $2.21 a share as of Monday's close, or a total of $260.5 million - stirred fear among investors worldwide about other banks' exposure to the troubled credit markets.

A little more than a year ago, Bear Stearns was selling for more than $170 a share, reports CBS News correspondent Anthony Mason. But the company's heavy investments in mortgage securities eroded the market's trust.

"You're going to have some very weak players pushed out of business," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. He said JPMorgan's buy of Bear Stearns and Bank of America Corp.'s acquisition of mortgage lender Countrywide Financial Corp. are probably not the only rescues the industry will witness during this credit crisis.

According to preliminary calculations, the Dow rose 21.16, or 0.18 percent, at 11,972.25, after falling nearly 200 and rising more than 100. The blue chip index was supported in part by JPMorgan, by far the biggest gainer among the 30 component stocks. JPMorgan rose $3.77, or 10.3 percent, to $40.31.

The Standard & Poor's 500 index fell 11.54, or 0.90 percent, to 1,276.60. The Nasdaq composite index, heavily populated by small and high-tech companies, fell 35.48, or 1.60 percent, to 2,177.01, while the Russell 2000 index of smaller companies fell 12.42, or 1.87 percent, to 650.48.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 2.00 billion shares.

Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.35 percent from 3.44 percent late Friday.

"The market has absolutely no idea what's going on," said Dan Alpert, managing director of Westwood Capital. "Some people have accused them of whistling past the graveyard - I don't think they even know where the graveyard is."

He added that short-covering - the unwinding of bets that stocks will fall - ahead of Tuesday's Fed meeting contributed to the market's atypical movements.

The Dow got a lift as investors aimed for large-cap stocks such as AT&T Inc., up 76 cents at $35.79, Verizon, up 79 cents at $34.61, and pharmaceutical maker Johnson & Johnson, up $1.39 at $64.04.

But the pain for stockholders in Bear Stearns, which succumbed to losing bets on souring mortgages for borrowers with poor credit, will be sizable. JPMorgan is buying Bear, including its midtown Manhattan headquarters, for about 1 percent of the investment bank's worth little more than two weeks ago. Bear Stearns' buyout arrives after a short-term bailout Friday organized by the Fed and involving JPMorgan.

Bear Stearns shares fell 86 percent to $4.10 - still above the buyout price, implying that some shareholders believe the deal terms might change.

Shareholders of Bear Stearns have filed a class action suit against the management which only last week insisted the company was sound reports Mason. Nearly a third of Bear Stearns is owned by its employees. Not only has their savings been wiped out but more than half of the 14,000 workers reportedly could be fired.

Some investors worry Lehman Brothers Holdings Inc. might be next to fall. Lehman - the investment bank considered most similar to Bear Stearns - and other major investment banks are slated this week to report quarterly results.

DBS Group Holdings Ltd., Southeast Asia's largest bank, reportedly instructed traders in an e-mail early Monday not to do business with the bank. According to Dow Jones Newswires, DBS Group later told traders to disregard the earlier e-mail. Lehman denied there were any problems with DBS.

Lehman fell $7.51, or 19 percent, to $31.75.

While investors focused on the financial sector, fresh economic news offered little solace. The Fed said output at the country's factories, mines and utilities fell by 0.5 percent in February, the biggest decline last October. Many analysts had been expecting a slight increase of one-tenth of one percent.

The Commerce Department also said Monday the current account deficit, the broadest measure of foreign trade, fell slightly in 2007 as stronger growth in U.S. exports offset a spiking foreign oil bill.

The dollar sank to a record low against the euro and hit a 12 1/2 year low against the Japanese yen, while gold prices rose to another record high. Crude oil plunged from record levels by $4.53 to settle at $105.68 per barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 3.71 percent, while Hong Kong's Hang Seng index fell 5.18 percent. Britain's FTSE 100 fell 3.86 percent, Germany's DAX index dropped 4.18 percent, and France's CAC-40 lost 3.51 percent.

[forthepeopl1]

ITS TIME FOR AMERICANS TO TAKE UP ARMS AGAIN, AND TAKE OUR COUNTRY BACK.

ITS OUR RIGHT UNDER THE CONSTITUTION..IT STATES THAT IF OUR GOVERNEMNT IS NOT FOLLOWING WHAT THE MAJORITY OF AMERICANS WANT, THAN ITS UP TO AMERICANS TO CHANGE THAT, AND START OVER WITH A NEW GOVERNEMNT FOR THE PEOLPE BY THE PEOLPE..

SO ARE WE READY YET TO TAKE OUR COUNTRY BACK..THEY CANT KILL US ALL IF WE THE PEOPLE OF WHAT 27500000 MILLION STAND UP AND MARCH DOWN TO WASHINTON THE OTHER 2500000 ARE THE ONES THAT ARE MAKEING BILLIONS ON US POOR..THATS THE ONE PERCENT THAT IS RUNNING AMERICANS AND AMERICA BROKE..

READY YET..LETS GO

I WATCH A MOVIE LAST NIGHT THAT SAYS IT ALL

HANG EM HIGH!!!!!!!!!!!!!!!!!!!!!

[cattlekate]

Specifically the firm is looking into whether Bear Stearns lived up to its fiduciary duty to employees who held Bear Stearns stock as part of the company%u2019s pension plan.
posted by Firmani at 03:12 PM : Mar 18, 2008

Great Post!

And I''d like to know who cashed out their $85 - 90 per share portfolio in the last quarter!

Who had the Head''s Up?!

[enriquecaliente]

The GOVERNMENT will DO NOTHING to the WALL.ST and or BANKING executive''s. They are the CAPITAN''S of INDUSTRY. THEY LINE THE POCKETS OF THE POLITICIANS. THEY ARE THE GOVERNMENT. We are the IDIOTS who still believe that the people we vote for, represent us. THEY DON''T.!!! It is time for us to take a stand and take back this nation. The corruption has to stop. We are nothing but fodder for their enjoyment. If we as a nation do nothing then we deserve what happens to us.

[firmani-2009]

Hi All %u2013

I work with a law firm that is investigating Bear Stearns, and whether the company protected employees%u2019 interests during the recent stock collapse. Many Bear Stearns employees saw their retirement accounts decimated by recent events, and some are questioning whether Bear Stearns acted appropriately.

Specifically the firm is looking into whether Bear Stearns lived up to its fiduciary duty to employees who held Bear Stearns stock as part of the company%u2019s pension plan.

If you are a Bear Stearns employee and are concerned that the company%u2019s actions hurt you or your pension plan, you may want to contact Hagens Berman Sobol Shapiro (www.hbsslaw.com/bsc or [e-mail]) to learn more about the investigation or call the firm at 206-623-7292.

newster1

So uh what flavor koolaid you drinking there bubba?

Ron Paul is still in the race and was just recently RE-ELECTED to Congress for his 11th term.

You obviously have never taken the time to watch any Congressional Hearings between the Congress and the Federal Reserve? Guess who heads up the meetings?

RON PAUL

That''s right. It''s none other than the so called "has been" Ron Paul who drills the Fed chief regularly and has the guy sweating on national television when trying answer Paul''s questions on the ridiculus decisions the Fed makes.

What''s wrong with you people?! It doesn''t matter if Ron Paul doesn''t become president he is still a Congressman, recently re elected.And he is still head of the Congressional Financial Oversight Board.

Ron Paul and economist have predicted and warned us about what is happening. So go ahead Titanic passengers. Go back to bed. "This ship ain''t gonna sink". It''s your money.

[ov442]

So, im wating for someone to tell these big banks that since they have a bad credit history, they cant get a loan or if they are given one, they have to take it at a 29% APR, and have to pay a processing fee of 5%, as well as a yearly fee of 5%, and build up their credit again.
Or how about we Taxpayers get to Foreclose on their Offices, assets, and all the Executives Personal property since they are the cause of the bad decision making.
They Must pay a penalty, its how Consumers are hammered everyday.

The Govt. needs to treat Businesses the same way the businesses treat consumers.
Then i guarantee there would be some fair equity in how capitalism is used instead of abused.

[fuzzybear9]

Hello America and welcome Wall Street to CBS

Let me just brefiely say that after seeing this disturbing news
Fuzzy Bear is heading out the back door to the
chicken coop to lop the heads off all my scronie little chickens.
shoot no more eggs, and I might as well dump the milk from Bessy, down the river cause it aint worth nothin no more.
But I think I will try to keep a portion of the Cream.
anyway
have a good day
Wallstreet

Sincerely your in the hen house Bear
Fuzzy

[drinuk]

newster1 I could not agree more, if you are correct these greedy b a s t a r d s are guilty of insider trading and more to the point, causing the lack of confidence which brought the walls tumbling down.

Greed, Greed and more Greed, these people should be strung up.

[skyk-2009]

BUSH APPROVAL RATING IS 24%.................


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Posted by tylenol6 at 01:33 AM : Mar 18, 2008
+ report abuse

Some have it as low as 19%! No President, since such figures have been kept, has ever gone as low as Bush, regardless of which figure you take.

[skyk-2009]

Did the deaths of 3000 people at the world trade towers satisfy Obama and his church for their justice? Do they have any other plans on their agenda for white America to get what they deserve?

GOD D-A-M-N WHITE AMERICA

OPRAH was the sales lady!

Mr. Dumb says %u201CI cannot believe this!%u201D
Is it you cannot believe this or you will not believe this!




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Posted by x123123 at 11:45 PM : Mar 17, 2008

Are you on another planet? First the topic here is the failure of a VERY large financial institution and NOT your bigotry. I say "Your bigotry" because anyone who see''s the terrible situation this nation faces with this crisis and want''s to discuss something Obama''s Pastor said is more concerned with hatred for Obama than with the crisis we face.