J.P. Morgan Lifts Dow Industrials,
But Elsewhere, Financials Decline

Big-name stocks managed a comeback Monday, but many banks and Wall Street brokerages suffered after Bear Stearns was sold for a song and the Fed stepped in with more emergency measures designed to ease the strain on the financial system from the ongoing credit crisis.

Major stock indexes ended mixed. The Dow Jones Industrial Average, which was down more than 190 points at its intraday low, ended up 21.16 points, or 0.2%, at 11972.25, driven by a 10.3% gain in component J.P. Morgan Chase, which swooped to the rescue of Bear Stearns. J.P. Morgan's climb contributed 31 points to the Dow, more than accounting for the benchmark's closing gain. On the year, the Dow is off 9.9%.

Bear Stearns agreed Sunday to sell itself for $2 a share, or $236 million, to J.P. Morgan. The terms represented a bargain-basement price that shocked investors who had anticipated that bear could be sold after receiving assistance from J.P. Morgan and the New York Fed Friday, but at a richer valuation. Many analysts argued Bear Stearns' Manhattan headquarters alone was worth about $1 billion. Bear Stearns shares plummeted more than 84%.

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But other, broader market measures fell as other top Wall Street names came under pressure. The Standard & Poor's 500 Index slid 0.9%, or 11.54 points, to 1276.70, led by a 3% decline in its financial sector. The S&P 500 is down 13% this year.

The tech-focused Nasdaq Composite Index was off 1.6%, or 35.48 points, to end at 2177.01, off 18% year to date. The Russell 2000, which includes many small companies that rely heavily on a growing domestic economy, fell 1.9%, or 12.42 points, to 650.48, suffering a heavier loss in percentage terms than indexes focused more on large-cap stocks. The index is off 15% this year.

Despite the advance for J.P. Morgan many financial stocks crumpled. Lehman Brothers Holdings lost 19%, dropping further after a 15% skid Friday. Merrill Lynch slid 5.4%, Morgan Stanley fell 8% and Goldman Sachs Group slid 3.7%. Citigroup shares fell 6%.

The market's split Monday highlighted how investors are shying away from risky bets and seeking shelter in relatively safe household-name companies.

"Rather than running for the exits at this point, investors are just changing their seats," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "They're staying in the market, although they're still gun-shy about the financials."

Highlighting the trepidation many in the market are still feeling, the Chicago Volatility Index jumped, climbing 3.5% at 32.24. Gains in the index signal that investors expect more selling and are buying insurance in the form of options to protect themselves against anticipated dips.

"We've had a lot of smart money coming in this month," from hedge funds and other deep-pocketed players buying options, said trader Todd Salamone at Schaeffer's Investment Research in Cincinnati, Ohio. "It shows you that just because we've had a big selloff the last few days, the market is not necessarily going to lose its momentum."

The declines at investment banks are a sign of mounting strain on those firms, which use high levels of leverage and must finance billions of dollars of assets daily in the so-called repo markets, where they borrow cash using securities as collateral.

"The unfortunate events at (Bear Stearns) will lead to sharply increasing funding pressure on the other four large capitalization brokers in the near term," Brad Hintz, an analyst at Alliance Bernstein, wrote in a note to clients Monday.

Mr. Hintz, a former chief financial officer at Lehman, said Merrill and Morgan Stanley appear to have the strongest funding position, with Lehman next and Goldman the weakest in terms of liquidity. "All the brokers are going to face a funding run this week, but it should not last long," Mr. Hintz wrote.

Other professional investors were guardedly optimistic about sectors aside from the financials.

"If you look at the wave of bad news we had in the morning, the market has actually held up pretty well," said strategist Al Goldman of Wachovia Securities. He cautioned, however: "I think we have made a market bottom, but that doesn't make it the bottom."

The Fed Sunday cut its discount rate by a quarter percentage point to 3.25%. Some Wall Street pros viewed the Fed's cut -- which came just two days before a scheduled meeting -- with mixed feelings. Traders and analysts are generally glad to see the Fed acting decisively, but also disconcerted that the central bank has to keep improvising new steps rather than taking a steadier path.

"The Fed has pulled out all the stops, and eventually it will work because it always does," said Cheryl Duke, chief investment officer at Eastover Capital Management in Charlotte, N.C. But she added, "it's still likely that we haven't seen all the bad news that will come out" before the stock market can make a sustained rebound.

Gold futures rose $4.50, or 0.5%, to a record $1,002.60 per ounce, the metal's first close over the $1,000 mark in New York trading. The metal is traditionally a safe haven for investors who have lost confidence in currency and other paper investments as long-term stores of value.

Investors flocked to long-dated government debt for safety. In recent trading, the two-year note was up 11/32 to yield 1.312%, and the 10-year note was up 1-14/32 to yield 3.303%.

In currency trading, the dollar plunged as low as 95.72 yen, its lowest since August 1995 -- dragged down by a gloomy outlook for the American economy and prospects for lower interest rates. The greenback recently fetched 97.10 yen, down from 99.32 yen late Friday. The euro hit a record high $1.5903 but recently cost $1.5724, compared to $1.5671 late Friday.

Crude futures fell as traders took profits from an earlier rally to a new record high of $111.80 a barrel. Oil contracts ended down $4.53, or 4.1%, at $105.68 per barrel on the New York Mercantile Exchange.