Market bottom?


Last week’s move by the Fed led to a strong, albeit unsustained, rally in the major indices. But investor confidence waned toward the end of the week, and outright panic at Bear Stearns, which lost 47% of its share value on Friday

Carlyle (CCC), Citi, and Bear Stearns lead a list of troubled financials that have fallen on hard times, facing liquidity problems as the uncertain valuation of collaterized debt obligations have weighed heavily on their ability to operate. Today, WSJ is reporting a move by JP Morgan to acquire Bear Stearns.

Effective immediately, J.P. Morgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. The deal isn’t subject to any conditions, except shareholder approval. It is expected to close before the end of the second quarter.

Government regulators, including the Federal Reserve and the Office of the Comptroller of the Currency, have given their blessing to the transaction.

We may be at the bottom.

Or not.

The Fed is keeping their powder dry, with rumors of an additional rate cut of 75bp. Obviously the central bank views the liquidity crisis as a bigger concern than an increasing rate of inflation.

Overnight, the Nikkei is down more than 3% in early trading.

A good sign that the aggressive moves by the regulators might work: The Europeans hate it. One thing for sure: market opening will be very tense tomorrow morning.

4 Responses

  1. It’s almost spring.
    I’m encouraged by the fact that recognition of the weak dollar is evident, and moves to strengthen it are in the works.
    The mortgage crisis started a year ago, so where was the market then and now?
    Here’s an interesting analysis from one year ago, and it doesn’t even mention real estate values or foreclosures.
    Considering the DOW actually climbed to over 14,000 a few months ago, and is basically where it was a year ago is encouraging, but it is only one indicator. To me the value of the dollar is a greater indicator of economic health.
    Here’s a report on the markets from Friday’s close.
    I liked this quote…alot!

    Friday’s stock market pullback comes a day after an anxious stock market rebounded from an early plunge following a Standard & Poor’s prediction that financial companies are nearing the end of the massive asset write-downs that have pummeled the stock and credit markets for months. The S&P projection had given investors some hope that the seemingly unrelenting losses from the mortgage and credit crisis could have been bottoming out.

  2. Still, $2 a share for Bear Stearns, that’s pitiful.
    It had dropped to $30 at the end of trading on Friday.
    /ouch

  3. Guess they squandered a lot of money on things that were worth nothin’.

    Maybe the financial companies need to get rid of a lot of MBAs.

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