(Repeats to additional subscribers) (Adds Oppenheimer comments, Empire State survey, updates futures)
By Jennifer Coogan
NEW YORK, March 17 (Reuters) - 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.
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 [ID:nN16500718].
“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 percent. (Editing by James Dalgleish)