Wall Street rallies on Bear Stearns price increase, home salesMarch 25th, 2008 - 6:28 am ICT by admin
New York, March 25 (DPA) US stock markets surged Monday on news that home sales increased in February and that bank JPMorgan Chase would increase its price to buy ailing investment firm Bear Stearns. The National Association of Realtors said the month-to-month sales of existing homes rose 2.9 percent in February, overcoming analysts’ predictions of further decline, and bringing in the first increase in months.
Faced with massive resistance from stockholders, JPMorgan Chase Monday agreed to quadruple its offer for Bear Stearns to $10 a share.
JPMorgan originally offered $2.50 a share, which represented a 90 percent write down in the value of its stock. The board accepted the offer, but shareholders were poised to reject the fire sale price.
The new offer values the company at $1 billion, after a shortage of cash forced it to seek short-term financing from the Federal Reserve through JPMorgan Chase because clients had pulled $17 billion from Bear Stearns over two days.
The collapse of two of its mortgage funds had helped spark the turmoil in the US financial sector and the resulting economic downturn.
“It appears that people are interested in buying stocks every time there’s just a whiff of good news,” John Carey, of Pioneer Investments in Boston told Bloomberg financial news. “We’re starting from a fairly modest level of valuations in this downturn and so perhaps people are right in suggesting that downside is limited.”
The blue chip Dow Jones Industrial Average gained 187.32 points, or 1.52 percent, to 12,548.64. The broader Standard & Poor’s 500 Index climbed 20.37 points, or 1.53 percent, to 1,349.88. The technology heavy Nasdaq Composite Index rose 68.64 points, or 3.04 percent, to 2,326.75. Markets were closed Friday.
The US currency fell against the euro to 64.81 euro cents from 64.83 euro cents Thursday, but rose against the Japanese currency to 100.73 yen from 98.91.
Gold slipped $1.30 to $918.70 per fine ounce.
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