Bear Bailout Slams Stocks
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News that the Federal Reserve and JP Morgan engineered emergency funding for Bear Stearns sent stocks plunging on Friday.
The rare maneuver previously done in the 1960s and 1930s spooked investors reeling from eight months of a worsening credit crisis and undid an early rally on upbeat inflation data.
At their lows, the major indexes were down by 3%, but still ended the day about 2% lower. Bear Stearns plunged 47% to a 10-year low.
After Friday's news, Fed funds futures traders began pricing in a huge 100-basis point rate cut when the Fed meets on Tuesday.
Microsoft and Yahoo both fell more than 2% each depsite reports that the two met on Monday to discuss Microsoft's merger proposal.
Micron, Nvidia and Broadcom led a weak chip sector with losses of 5.4% or more.
Dot Hill and Universal Display fell on their earnings reports, while Palm fell 7% ahead of its results due out March 20.
The Nasdaq fell 51 to 2212, the S&P lost 27 to 1288, and the Dow lost 194 to 11,951. Volume rose to 5.3 billion shares on the NYSE, and 2.57 billion on the Nasdaq. Decliners led by a 27-5 margin on the NYSE, and 22-6 on the Nasdaq. Downside volume was 92% on the NYSE, and 90% on the Nasdaq. New highs-new lows were 48-233 on the NYSE, and 43-278 on the Nasdaq.