Bear Stearns Hits Lowest Point in Years

Bear stood in sharp contrast to the rest of the investment banking sector, which rallied strongly after the Federal Reserve intervened to pump liquidity into the market.

Richard X. Bove, an analyst with Punk Ziegel & Co., lowered his earnings estimates on the company and cut his price target to $45 per share. The stock plunged as low as $55.42, its lowest level since Oct. 2002, before closing up 67 cents at $62.97.

There has been continued speculation in the market that the investment bank is having liquidity issues. Bear Stearns Chief Executive Alan Schwartz denied the speculation in a statement issued late Monday, and a spokesman did not return telephone calls on Tuesday.

Bove said in the note that Bear Stearns has more problems than its mortgage business. He said investment banking might be "the next domino to fall.

"Unless Bear can provide the full services in this sector that its peers are able to provide, it is less likely to pull down the big deals. It will operate with smaller clients in this business," he said in a note to clients. "Bear must also divest employees. It cannot afford what it has. Fewer people means fewer opportunities."

While Bear insists its financial position is sound, some investors say the stock's plunge in the last two days is a signal from the markets amid the ongoing crisis in mortgage-backed securities and other investments.

"This is just a bet on bankruptcy. We've been asking ourselves for the past year, who's going to go bust?" said George Feiger, chief executive of Contango Capital Advisors, the wealth management arm of Zions Bancorp. "The market is betting that Bear is more exposed to these securities than, let's say, Goldman."

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AP Business Writer Dan Seymour in New York contributed to this report.