New York - US stocks fell Friday amid news that investment firm Bear Stearns had received a financial bailout from bank JPMorgan Chase and the Federal Reserve. Bear Stearns received short-term financing from the Federal Reserve through JPMorgan Chase for up to 28 days after admitting it was short on cash. The company has been a major holder of bonds backed by risky sub-prime mortgage loans to borrowers with poor credit and the collapse of two of its funds helped spark the collapse of the sector and the economic downturn.
The move sent Bear Stearns shares to their lowest ever and sparked fears it could go out of business. It lost 47 per cent of its value, or 27 dollars to close at 30 dollars per share.
Other leading banks also lost at least 3 per cent amid continuing fears about the health of the US economy amid rising defaults on mortgages and tightened access to credit.
"What's worrisome here is the accumulation of revelations that are clearly shaking investor confidence," Nick Sargen of Fort Washington Investment Advisors in Cincinnati, Ohio told Bloomberg financial news. "This feeling of 'What's the next shoe to drop?' has the market on edge. You put your finger in the dike and another leak springs."
On Wall Street, the Bear Stearns announcement overshadowed government statistics released Friday that inflation had remained stable in February, making an interest rate cut by the Federal Reserve at a meeting next week more likely.
The blue-chip Dow Jones Industrial Average plummeted 194.65 points, or 1.60 per cent, to 11,951.09. The broader Standard & Poor's 500 Index slid 27.34 points, or 2.08 per cent, to 1,288.14. The high- tech Nasdaq composite index was down 51.12 points, or 2.26 per cent, to 2,212.49.
The S&P 500 fell 0.4 per cent for the week, while the Dow added 0.5 per cent and the Nasdaq remained unchanged.
The US currency fell against the euro to 63.81 euro cents from 63.99 on Thursday, and against the Japanese currency to 99.15 yen from 100.44.
