U.S. stocks plunged for the third day this week after Bear Stearns Cos. required a bailout from the Federal Reserve and JPMorgan Chase & Co. to avoid collapse.
Bear Stearns, the second-largest underwriter of U.S. mortgage bonds, tumbled the most ever after the brokerage said its liquidity deteriorated in the past day. The announcement overwhelmed economic reports that showed inflation ground to a halt and consumer confidence unexpectedly rose.
The Standard & Poor's 500 Index retreated 19.58, or 1.5 percent, to 1,295.9 at 10:58 a.m. in New York. The Dow Jones Industrial Average lost 146.54, or 1.2 percent, to 11,999.2. The Nasdaq Composite decreased 34.11, or 1.5 percent, to 2,229.5. The S&P 500 Financials Index lost 2.7 percent as all 92 members retreated.
``The real problem is the uncertainty,'' said John Kattar, who oversees about $2 billion as chief investment officer at Eastern Investment Advisors in Boston. ``The fact that the issue is so serious that the New York Fed directly has to intervene demonstrates that there are pretty big problems here with pretty big uncertainties.''
The S&P 500 is up 0.2 percent on the week. The benchmark for U.S. equities had been poised for its best week since the end of January before today after the Federal Reserve pumped $200 billion into the financial system to shore up banks and S&P predicted an end to subprime mortgage writedowns.
Bear Stearns
Bear Stearns, the manager of two hedge funds that collapsed in July, dropped $25.20, or 44 percent, to $31.80. Bear Stearns received funding from JPMorgan and the New York Federal Reserve as Chief Executive Officer Alan Schwartz said the securities firm's cash position has ``significantly deteriorated.'' Two days ago, Schwartz denied reports the firm's capital was at risk.
Citigroup, JPMorgan and Bank of America Corp., the three largest U.S. banks, each dropped more than 1 percent.
Boeing Co. added $2.55 to $76.73 after Morgan Stanley upgraded the world's second-largest commercial-aircraft maker to ``overweight'' from ``equal-weight.''
Traders now price in a 38 percent chance the Fed will cut its benchmark rate by a full percentage point to 2 percent by March 18, an outcome they had ruled out yesterday, according to Fed fund futures. The rest of the bets are for a 0.75 percentage point cut from the current 3 percent.
Economy Watch
The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 70.5 from 70.8 in February. The measure is the lowest reading since February 1992 and compares with an average 85.6 in 2007. Economists had forecast the confidence measure would fall to 69.3, according to a Bloomberg News survey.
The steady reading in the cost of living index followed a 0.4 percent gain in January, the Labor Department said. Economists surveyed by Bloomberg had forecast an advance of 0.3 percent. So-called core prices, which exclude food and energy, were also unchanged, the first time they didn't increase since November 2006.
Bear Stearns, the second-largest underwriter of U.S. mortgage bonds, tumbled the most ever after the brokerage said its liquidity deteriorated in the past day. The announcement overwhelmed economic reports that showed inflation ground to a halt and consumer confidence unexpectedly rose.
The Standard & Poor's 500 Index retreated 19.58, or 1.5 percent, to 1,295.9 at 10:58 a.m. in New York. The Dow Jones Industrial Average lost 146.54, or 1.2 percent, to 11,999.2. The Nasdaq Composite decreased 34.11, or 1.5 percent, to 2,229.5. The S&P 500 Financials Index lost 2.7 percent as all 92 members retreated.
``The real problem is the uncertainty,'' said John Kattar, who oversees about $2 billion as chief investment officer at Eastern Investment Advisors in Boston. ``The fact that the issue is so serious that the New York Fed directly has to intervene demonstrates that there are pretty big problems here with pretty big uncertainties.''
The S&P 500 is up 0.2 percent on the week. The benchmark for U.S. equities had been poised for its best week since the end of January before today after the Federal Reserve pumped $200 billion into the financial system to shore up banks and S&P predicted an end to subprime mortgage writedowns.
Bear Stearns
Bear Stearns, the manager of two hedge funds that collapsed in July, dropped $25.20, or 44 percent, to $31.80. Bear Stearns received funding from JPMorgan and the New York Federal Reserve as Chief Executive Officer Alan Schwartz said the securities firm's cash position has ``significantly deteriorated.'' Two days ago, Schwartz denied reports the firm's capital was at risk.
Citigroup, JPMorgan and Bank of America Corp., the three largest U.S. banks, each dropped more than 1 percent.
Boeing Co. added $2.55 to $76.73 after Morgan Stanley upgraded the world's second-largest commercial-aircraft maker to ``overweight'' from ``equal-weight.''
Traders now price in a 38 percent chance the Fed will cut its benchmark rate by a full percentage point to 2 percent by March 18, an outcome they had ruled out yesterday, according to Fed fund futures. The rest of the bets are for a 0.75 percentage point cut from the current 3 percent.
Economy Watch
The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 70.5 from 70.8 in February. The measure is the lowest reading since February 1992 and compares with an average 85.6 in 2007. Economists had forecast the confidence measure would fall to 69.3, according to a Bloomberg News survey.
The steady reading in the cost of living index followed a 0.4 percent gain in January, the Labor Department said. Economists surveyed by Bloomberg had forecast an advance of 0.3 percent. So-called core prices, which exclude food and energy, were also unchanged, the first time they didn't increase since November 2006.
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