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(Adds Oppenheimer comments, Empire State survey, updates
By Jennifer Coogan
NEW YORK, March 17 U.S. stock index futures
plunged on Monday after JPMorgan Chase (JPM.N) bought Bear
Stearns BSC.N at a fire sale price and the Federal Reserve
provided emergency cash to Wall Street, raising concern that
the global credit crisis is spiraling out of control.
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.
In a fresh sign of faltering confidence in the U.S. economy
and financial system, the dollar sank to its weakest against
the yen JPY= since 1995 and slumped against the euro EUR=.
JPMorgan is buying Bear Stearns for a mere $236 million, or
$2 per share, just one-fifteenth of the price the shares closed
at on Friday. Shares of Bear, the fifth-largest U.S. investment
bank, had reached a high of $172.61 last year. For more see
"This is not the kind of help you want to see. Bear Stearns
getting sold at $2 is alarming," said Peter Boockvar, equity
strategist at Miller Tabak & Co in New York. "When you see the
Fed relying on tools that haven't been used since the
Depression, it's alarming."
U.S. financial stocks tumbled in pre-market trading, led by
a 90 percent slump in Bear Stearns to $3.12. Lehman Brothers
LEH.N stock sank more than 28 percent to $28. Washington
Mutual (WM.N) shares dropped more than 18 percent to $8.65.
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. [ID:nL1773676].
Elsewhere in the financial sector, mortgage insurer PMI
Group Inc PMI.N 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.
S&P 500 futures SPc2 were down 33.80 points, well below
fair value, a formula to evaluate pricing taking into account
interest rates, dividends and time to expiration on the
contract. Dow Jones industrial average futures DJc2 fell 233
points, and Nasdaq 100 NDc2 futures lost 46.75 points.
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.
Other U.S. economic indicators on tap include industrial
production and capacity utilization at 9:15 a.m. (1315 GMT).
The National Association of Home Builders reports its housing
market index at 1 p.m. (1700 GMT).
On Friday, the Dow Jones industrial average .DJI shed
nearly 200 points, while the Standard & Poor's 500 Index .SPX
and the Nasdaq Composite Index .IXIC both lost more than 2
(Editing by James Dalgleish)