Market drops as Bear Stearns sold for $2/share
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By Jennifer CooganNEW YORK (Reuters) - Stocks fell on Monday after JPMorgan Chase bought Bear Stearns at a fire sale price and the Federal Reserve provided emergency cash to Wall Street as the global credit crisis worsened.JPMorgan is buying Bear Stearns for $236 million, or $2 per share -- one-fifteenth of the price at Friday's close. Shares of Bear, the fifth-largest U.S. investment bank, reached a high of $172.61 last year.Financial shares tumbled, with Bear down nearly 90 percent and Lehman Brothers down more than 22 percent at $30.30 on the NYSE. One exception was JPMorgan stock, up 9.1 percent to $39.86 on the NYSE, which helped stem declines on the Dow.The Fed made an emergency quarter-percentage-point cut to its discount rate to 3.25 percent on Sunday and expanded lending to a wider range of big financial firms, in the first such move since the Great Depression of nearly 80 years ago."This is going to get worse the longer the market prolongs the inevitable," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "With all these discount rate cuts, it seems like the Fed is running out of silver bullets. Maybe they have to come up with something bigger."The Dow Jones industrial average <.DJI> fell 58.62 points, or 0.49 percent, to 11,892.47. The Standard & Poor's 500 Index dropped 14.84 points, or 1.15 percent, to 1,273.30. The Nasdaq Composite Index <.IXIC> slid 26.50 points, or 1.20 percent, to 2,185.99.In a fresh sign of faltering confidence in the U.S. economy and financial system, the dollar sank to its weakest against the yen since 1995 and slumped against the euro .The "fire sale" of Bear has put U.S. banks at risk as it will result in valuation adjustments that could see share prices fall as much as 50 percent, Oppenheimer & Co analyst Meredith Whitney wrote.Elsewhere in the financial sector, mortgage insurer PMI Group Inc reported its biggest ever quarterly loss, mainly due to losses on its investment in bond insurer FGIC Corp. It also slashed its dividend by more than 70 percent.Shares of PMI dropped 10.9 percent to $5.07.The New York Federal Reserve Bank reported an unexpectedly steep drop in its manufacturing survey and a rise in prices paid. It was the worst reading of business conditions in the state of New York since the index was launched in July 2001.(Editing by James Dalgleish)
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