Rocky ride for stocks; eyes on Bear
NEW YORK (Reuters) - The rocky ride for the U.S. stock market is likely to intensify this week with investors focusing on a deal to save one of the biggest investment banks while regulators rapidly burn through options to limit more damage to the financial system.
All eyes will again be on Bear Stearns Cos BSC.N after news on Sunday that the fifth-largest U.S. investment bank was close to selling itself to JPMorgan Chase & Co.
On Friday the Federal Reserve and JPMorgan stepped in to rescue Bear Stearns with emergency funding as fallout from the global credit crisis took its toll on the brokerage's cash position.
Bear was hoping to announce a deal before the open of Asian markets, the Wall Street Journal said on Sunday.
News of the imminent announcement did not stop U.S. stock indexes futures from opening the week lower Sunday evening in New York. S&P 500 futures SPc2 pointed to a lower U.S. stock market open on Monday, falling 7 points, or 0.5 percent, while Nasdaq futures were down 7.0 point also at 1717 NQc2.
The U.S. dollar also breached a new low of $1.57 against the euro in early Monday morning Asian trading.
"It will be a logical outcome if the (U.S.) market kept panicking over fears of who is next," said Chip Hanlon, president Delta Global Advisors, Inc. in Huntington Beach, California on Sunday.
Beyond Bear Stearns the focus will be on how investment banks weathered the credit market meltdown in their first quarter when four major Wall Street firms report earnings this week. Bear Stearns will report its results on Monday.
Bear Stearns is first out of the block on Monday. Bear moved up its earnings release, which was initially scheduled for Thursday. Lehman Brothers LEH.N and Goldman Sachs (GS.N) will report earnings on Tuesday, followed by Morgan Stanley (MS.N) on Wednesday.
On Friday, Lehman's stock was the second-biggest decliner among investment banks, falling 14.6 percent, or $6.73, to close at $39.26 on the New York Stock Exchange.
Forecasts and stock prices have come down sharply for all the big banks, as the credit crunch spreads across almost every market.
FED FOCUS
The Federal Reserve's policy-setting meeting on Tuesday will also be a highlight of the holiday-shortened week. The U.S. stock market will be closed for Good Friday.
U.S. interest-rate futures showed more than a 50 percent chance on Friday that the central bank will cut its benchmark fed funds rate target by 100 basis points this week to revive an economy that many say is already in recession.
"Most of the focus will be on the Federal Reserve. Will the Fed cut rates? And if so, how much? And most importantly, what will the statement that accompanies the decision say?" asked Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York. "Frankly, the Fed said it all in their bailout of Bear Stearns." Continued...
