Steep Selloff of Bear Stearns Stocks

This is the biggest news of the day: Bear Stearns [[bsc]], the second-largest underwriter of US mortgage bonds, is in big trouble and has approached the Fed. After denying for three days that access to capital was at risk, Bear Stearns said today that its cash position had “significantly deteriorated”. The New York Fed has stepped in to provide financing through JPMorgan for up to 28 days, the bank said in a statement today. It is an unexpected turn of events for Bear Stearns: Its CEO said earlier this week that the company’s “liquidity cushion” was enough to weather the credit-market crunch. The WSJ online reports rating agencies are meeting on Bear Sterns news, and a possible downgrade could come as early as today. Bear Stearns stocks are down by a record 53%.

Lehman Brothers [[leh]], the largest underwriter of mortgage bonds, tumbled 11%. Citigroup [[c]], JPMorgan [[jpm]] and Bank of America [[bac]], the three largest banks in the US, each fell more than 3%.

Moody’s has downgraded Washington Mutual [[wm]] to Baa3 from Baa2. The outlook is negative. Moody’s cited the deteriorating housing market and the resulting increase in “expected provisioning needs on Wamu’s residential mortgage loan portfolio”.

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Comment by Phi

2008-03-14 15:29:01

the fed should stop acting like that

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Comment by Sebas

2008-03-14 23:13:51

Hey, Grace, what’s happened to your comments recently. you’ve become more like a reporter than a trader/commentator. You used to offer viewpoints and direction to trade rather than the recent news reporting style.

We’re not so concerned about what has happened in the world as to what it means to our trading and the direction we should look at.

Thanks, and hope you’re not too home sick.

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Comment by Chuck

2008-03-14 23:51:47

Personally I find it more organised like that. She still talks about forex trading in the forex posts, just this is under the stocks category it seems

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Comment by Michael

2008-03-15 01:21:24

Hi Grace,

Such a disappointment for Bear Stearns. They’re such a huge part of Wall Street’s history and I’d be sorry to see such an iconic institution go.

But if they can orchestrate some type of a bailout where they can still function as an independent entity - I would totally gobble up that stock.

Keep up the good work!

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