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News That Moved the Market
With A Name Like Bear, Why Didn't I Buy Puts? Financial news continues to determine the direction of the market and today's news was bad. Before the open, information was released that Bear Stearns (BSC, -47.4%) would receive emergency funding from the Fed through JP Morgan (JPM, -4.1%). The Fed used a little-known law that allows it to lend funds to companies after a special FOMC vote. The funds went through JP Morgan because it was operationally simpler than a direct loan, according anonymous staff member. The Fed made a pivotal decision to save Bear, understanding that a major bank going under would create an enormous financial crisis. JP Morgan is also looking to purchase at least some parts of Bear, and will help the troubled brokerage to locate additional funding. T he markets fell sharply on the news, with the VIX jumping to a 7-week high.
CPI Shows Tame Inflation. Though the news was forgotten after Bear Stearn's bombshell, the Labor Department announced this morning that inflation had moderated last month. The CPI and core-CPI, which does not include food and energy costs, both came in flat. The data said energy prices fell 0.5%, which surprised many considering the huge run up in energies recently. Most economists believe the Fed will lower interest rates by half a point next week.
Lehman Obtains Credit Line. Lehman Bros. (LEH, -14.6%) got a $2 billion, three year credit line from 40 banks. Lehman dropped dramatically after Bear Stearn's news came out. We will get a look at Lehman's numbers next week, when it reports its latest quarterly earnings.
Quick Tics:
Microsoft (MSFT, -2.3%) and Yahoo (YHOO, -2.9%) met earlier this week without reaching an agreement on Microsoft's merger proposal…
Gold hit an all-time high of $1,007.30 today...
Boeing (BA, +2.7%) traded higher after getting an upgrade from Morgan Stanley (MS, -4.9%).
Monday's Notable Earnings
Bear Stearns (BSC) Before Open
Economic Events:
8:30 AM: NY Empire State Index
9:00 AM: Net Foreign
9:15 AM: Capacity Utilization
9:15 AM: Industrial Production
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