Stocks Gyrate After Bear Stearns Deal

JPMorgan, one of the Dow components, rose $3.55, or 9.7 percent, to $40.09. The Fed essentially guaranteed JPMorgan that it would backstop any risk involved in taking over the 85-year-old Bear Stearns, which has 14,000 workers worldwide.

Bear Stearns shares fell 86 percent to $4.20 still above the buyout price, implying that some shareholders believe the deal terms might change. About one-third of Bear Stearns stock is held by its employees.

Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.34 percent from 3.44 percent late Friday.

The dollar sank to a record low against the euro and hit a 12 1/2 year low against the yen, while gold prices surged to another record high.

Light, sweet crude dropped $2.47 to $107.74 per barrel on the New York Mercantile Exchange, after rising to nearly $112 a barrel in premarket trading.

The pain for investors in Bear Stearns, which succumbed to losing bets on souring mortgages for borrowers with poor credit, will be sizable. JPMorgan is buying Bear, including its midtown Manhattan headquarters, for about 1 percent of the investment bank's worth little more than two weeks ago. Bear Stearns' buyout arrives after a short-term bailout Friday that JPMorgan led and that the Fed backed.

The market's concern wasn't limited to the Bear sale. DBS Group Holdings Ltd., a large bank based in Singapore, instructed traders via e-mail Monday to disregard an earlier e-mail barring new transactions with Lehman Brothers Holdings Inc., according to Dow Jones Newswires. Earlier Monday, DBS emailed traders and said not to engage in new transactions with Lehman or Bear, according to two people familiar with the situation, Dow Jones reported.

Lehman fell $9.41, or 24 percent, to $29.85.

This week, Lehman and other major investment banks are slated to report quarterly results. Investors will likely be focusing on comments from the companies for insights about their financial well-being.

While investors were focused on the financial sector, fresh economic news offered little solace. The Fed said output at the country's factories, mines and utilities fell by 0.5 percent in February, the biggest decline last October. Many analysts had been expecting a slight increase of one-tenth of one percent.