Wall Street tumbles after Bear whimpers
NEW YORK » Wall Street plunged anew yesterday after a near meltdown at Bear Stearns Cos. handed investors the unwelcome confirmation that the credit market's troubles are far from over.
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.
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. The Russell 2000 index of smaller companies fell 16.81, or 2.47 percent, to 662.90.
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.
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.
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 yesterday.
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.
Stock market investors yesterday were also eyeing the dwindling dollar and events in the soaring commodities market. Gold prices touched another fresh record yesterday.
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.
On top of yesterday'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.