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NEW YORK: US futures fell late on Sunday after JPMorgan Chase rescued Bear Stearns and the Federal Reserve took emergency measures to provide cash to big financial firms, intensifying concerns that there could be more casualties in the broadening credit crisis.
JPMorgan Chase & Co said it would buy Bear Stearns for just $2 a share in an all-stock deal valuing the fifth largest US investment bank at about $236 million.
Around the same time, the Federal Reserve unexpectedly lowered the discount rate it charges on direct loans to banks and announced a new facility through which it would lend to financial firms to borrow at the new rate.
Analysts were skeptical that the Fed’s action, the latest in a series of emergency moves to support global credit markets, would be enough to avert further turmoil. The US dollar fell below 97 yen to a 12-year low, while Treasuries surged as investors fled to safer assets.
US stock index futures pointed to a sharp decline in stocks on Wall Street on Monday.
"I can’t imagine it’s going to be a good day in financial markets tomorrow just because of fear, and not because of any particular knowledge, but just because of fear of what could be in or what’s not in all financial service company balance sheets," said Timothy Ghriskey, chief investment officer at Solaris Asset Management in New York.
S&P 500 futures fell 21.20 points and Dow Jones industrial average futures fell 119 points. Nasdaq 100 futures fell 27 points.
The Federal Reserve said it cut the discount rate to 3.25 per cent from 3.5 per cent, effective immediately. It also said it was setting up a new lending program under which so-called primary dealers could borrow directly from the Fed at that same rate.
The global credit crisis began last year when the deteriorating US housing market set off a chain of events that created more than $100 billion in losses at the world’s largest banks.
Bear Stearns’ cash reserves were drained by fleeing customers on Thursday, and on Friday the bank secured emergency funding from the Federal Reserve, extended through JPMorgan.
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