NEW YORK (AP) - businessminute
Wall Street plunged anew Friday after a near meltdown at Bear Stearns Cos.
handed investors the unwelcome confirmation that the credit market's troubles
are far from over. Word that the investment bank needed rescuing touched off a
wave of selling that left each of the major indexes down more than 1.5 percent
on the day; the Dow Jones industrial average fell nearly 200 points.
The plan by the New York Federal Reserve and JPMorgan Chase & Co. offers
Bear Stearns relief from a sudden liquidity crunch that analysts surmised could
have felled the investment bank. But the company's position on the precipice of
financial disaster left many investors shaken and spoiled some hopes that
troubles in the moribund credit market are on the mend.
Stocks showed moderate increases in the early going after a Labor Department
report showed the Consumer Price Index remained flat for February. Wall Street
has been expecting inflation would show an increase. But the gains quickly
disappeared after investors learned about the severity of troubles at Bear
Stearns.
"This is another chapter in a book rather than a one-act play," said Phil
Orlando, chief equity market strategist at Federated Investors. He said the
market is worried that further trouble in the credit markets will emerge and
that the ramifications of the credit strains and a slowing economy could result
in recession.
"Investors thought they are probably more the norm than the exception and
maybe this is the tip of the iceberg," he said, referring to Bear Stearns. "Our
sense is that this is sort of an amoeba here and this is sort of a broadly
spreading situation."
The Dow fell 194.65, or 1.60 percent, to 11,951.09. The Dow had been down as
much as 313 points.
Broader stock indicators also declined but pulled off their lows. The
Standard & Poor's 500 index fell 27.34, or 2.08 percent, to 1,288.14, and the
Nasdaq composite index fell 51.12, or 2.26 percent, to 2,212.49.
For the week, the major indexes were mixed, with the Dow showing a modest
gain, the Standard & Poor's 500 index slipping and the Nasdaq composite index
finishing exactly where it began.
The Russell 2000 index of smaller companies fell 16.81, or 2.47 percent, to
662.90.
Bond prices jumped as stocks retreated. The yield on the benchmark 10-year
Treasury note, which moves opposite its price, fell to 3.44 percent in late
trading from 3.53 percent late Thursday.
Comments from the Fed might have helped corral some of investors'
nervousness Friday. The central bank said it voted unanimously to sign off on
the arrangement between JPMorgan and Bear Stearns and that it is ready to
provide resources to stave off further credit troubles. Fed Chairman Ben
Bernanke also said Friday he would do what was possible to aid struggling
homeowners.
Still, investors remained nervous. The Chicago Board Options Exchange's
volatility index, known as the VIX, and often referred to as the "fear index,"
jumped 14.2 percent.
Declining issues outnumbered advancers by about 5 to 1 on the New York Stock
Exchange, where consolidated volume came to 5.18 billion shares compared with
4.94 billion shares traded Thursday.
"The Bear Stearns news reversed the early positive sentiment from the
inflation data," said Peter Cardillo, chief market economist at Avalon Partners.
"There had been nervousness about Bear Stearns for some time and now the
market's concerns about the company have been proven true."
Friday's pullback comes a day after an anxious stock market rebounded from
an early plunge following a Standard & Poor's prediction that financial
companies are nearing the end of the massive asset write-downs that have
pummeled the stock and credit markets for months. The S&P projection had given
investors some hope that the seemingly unrelenting losses from the mortgage and
credit crisis could have been bottoming out.
Bear Stearns' woes rekindled investors' nervousness about the troubles in
the financial sector. The company's shares skidded $27, or 47 percent, to $30,
while JPMorgan fell $1.57, or 4.1 percent, to $36.54.
Other financial names declined as well. Lehman Brothers Holdings Inc. fell
$6.73, or 15 percent, to $39.26 and Merrill Lynch & Co. slid $2.75, or 5.9
percent, to $43.51.
Stock market investors Friday were also eyeing the dwindling dollar and
events in the soaring commodities market. Gold prices touched another fresh
record Friday.
Light, sweet crude, which set a fresh record Thursday, fell 12 cents to
$110.21 per barrel on the New York Mercantile Exchange. Oil came close to its
record of $111 set Thursday.
The market's fall Friday caps a big week for the markets. On Monday, stocks
continued a sell-off from last week, falling more than 1 percent as oil again
moved into record territory. Then, on Tuesday, stocks surged after the Fed said
it would put up $200 billion to loosen tight credit markets. The Dow surged
nearly 417 points, its biggest one-day percentage gain in five years. Stocks
posted more modest losses and gains Wednesday and Thursday as investors
speculated over how much help the Fed's plan would ultimately provide.
On top of Friday's concerns, Wall Street remains anxious for Tuesday's Fed
meeting at which the central bank is still expected to lower interest rates.
While Wall Street would welcome cheaper access to cash to help consumers and
businesses, the freer flow of money would likely fan inflation concerns and
could further weaken the dollar.
Overseas, Japan's Nikkei stock average finished down 1.54 percent. Britain's
FTSE 100 closed down 1.07 percent, Germany's DAX index fell 0.75 percent, and
France's CAC-40 lost 0.82 percent.
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The Dow Jones industrial average ended the week up 57.40, 0.48 percent, at
11,951.09. The Standard & Poor's 500 index finished down 5.23, or 0.40 percent,
at 1,288.14. The Nasdaq composite index ended the week unchanged at 2,212.49.
The Russell 2000 index finished the week up 2.79, or 0.42 percent, at
662.90.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index
that measures 5,000 U.S. based companies -- ended Friday at 12,992.93, down
59.24 points, or 0.45 percent, for the week. A year ago, the index was at
14,046.10.
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