(Updates to early morning)
By Jennifer Coogan
NEW YORK, March 17 U.S. stocks fell 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 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. For more see [ID:nL17118660].
Financial shares tumbled, with Bear down nearly 90 percent
and Lehman Brothers LEH.N 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
.SPX 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 JPY= since 1995 and slumped against the euro EUR=.
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.
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)