U.S. Markets
Dow +21.16 (+0.18%)
Nasdaq -35.48 (-1.60%)
S&P 500 -11.54 (-0.90%)
News That Moved the Market
Don't Panic. When the opening bell rang, many expected today to be a bloodbath. Bear Stearns's (BSC, -84.0%) liquidity crisis and sale to JP Morgan (JPM, +10.3%) for about $240 million shocked most investors and left many wondering what bank was next. To stem the fears, the Fed reacted with assertiveness, lowering its discount rate by a quarter of a point to 3.25% and offering lending to a greater number of companies, including investment banks. Though foreign markets lost ground overnight, the Fed's actions were enough to reduce nervousness and actually convince some that the Fed will back this market and not let it nosedive. Trading turned around midday and a late rally allowed the markets to end basically flat. Tomorrow's Fed announcement will be important, with the market now expecting a full-point cut.
Lehman May Be Next. Lehman Brothers (LEH, -19.1%) stock dropped as speculation increased that it may be the next to fold. The move came after CEO Richard Fuld said the Fed's "move improves the liquidity picture and, from my perspective, takes the liquidity issue for the entire industry off the table." The idea that the company's CEO would have to say something like that, especially after Bear's CEO's gave a similar statement last week, scared investors and drove them to sell their Lehman positions. Tomorrow, Lehman reports its latest earnings.
Quick Tics:
Commodities had a weak session, with the 4.6% decline in the CRB Index…
To this point, Bear Stearns's book value was reported to be $84 per share at the end of the fourth quarter.
Tuesday's Notable Earnings:
Adobe Systems (ADBE) Time Not Supplied
Goldman Sachs (GS) Before Open
Lehman Brothers (LEH) Before Open
Gamestop Corp. (GME) Time Not Supplied
Economic Events:
8:30 AM: Housing Starts
8:30 AM: PPI
10:00 AM: State Street Investor Confidence Index
2:15 PM: FOMC Announcement
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