US stocks waver in aftermath of Bear deal

Wall Street clawed back from sharp losses Monday, with investors snapping up bargain stocks after JPMorgan Chase & Co. bought stricken Bear Stearns & Co. in a deal backed by the government. The Dow Jones industrials fluctuated in and out of positive territory.

At 1445 GMT, the Dow Jones Industrial Average was off a modest 6.92 points (0.06 percent) to 11,944.17, coming back from opening losses of nearly 200 points.

Broader indexes also made up some lost ground. The Standard & Poor's 500 index fell 9.29, or 0.72 percent, to 1,278.85, while the Nasdaq composite index fell 22.85, or 1.03 percent, to 2,189.64.

JPMorgan is one of the Dow components, and rose $3.92, about 10 percent, to $40.46. The Fed essentially guaranteed JPMorgan that it would backstop the risk in taking over the 85-year-old Bear Stearns, which has 14,000 employees 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.

JPMorgan Chase prepared Monday to take over Bear Stearns for 236 million dollars, just a fraction of what it was worth only last week after a deal to avert a collapse of the white-shoe brokerage that became the biggest Wall Street victim of the subprime, or high-risk, mortgage crisis.

But many said Bear Stearns would not be the last victim.

"Some analysts on Wall Street are speculating that Lehman Brothers could have similar liquidity problems at Bear Stearns," said Andrea Kramer at Schaeffer's Investment Research.

Lehman Brothers shares plunged 21 percent to 30.87 dollars and Citigroup, another troubled financial firm, slumped 4.9 percent to 18.81.

In other news helping sentiment, H&R Block rose 0.72 percent to 17.95 dollars as the group agreed to sell its Option One mortgage servicing business for 1.1 billion dollars to a group headed by billionaire Wilbur Ross.

"At this point it is clear that the Federal Reserve is going to take whatever action they deem necessary to show their commitment to bringing order to the credit markets," said John Wilson, strategist at Morgan Keegan.

In foreign exchange, the dollar fell by as much as 3.5 percent to hit 95.75 yen, a level not seen since September 1995.

(Agencies)