Russell 2000 falling
The Russell 2000 (NYSE:IWM) and the other major U.S. indices opened lower as news of Bear Stearns’ collapse made investors nervous.
At 10:11 p.m. ET, the small-cap index was missing 8.67 points, or 1.31%, to 654.23. The Dow Jones Industrial Average (INDU) had shed 56.91 points, or 0.48%, to 11,894.18.
Troubled investment bank Bear Stearns (NYSE:BSC) has been sold for just $2 per share, according to an announcement on Sunday. A year ago the New York-based company, which had been severely affected by the meltdown in the subprime mortgage sector, was worth over $170 per share.
The buyer is rival JPMorgan Chase & Co. (NYSE:JPM), which received about $30 billion in special financing from the U.S. Federal Reserve to complete the deal. That’s the first time in history that the Fed is giving money for one investment bank to buy another and prevent its bankruptcy.
Fear of widespread financial distress led the U.S. Central Bank to lower its discount rate, the rate at which commercial banks borrow from the Fed, to 3.25% from 3.50%, on Sunday.
Small-cap stocks are falling, with shares of KMG Chemicals, Inc. (Nasdaq:KMGB) among the biggest losers. The Houston, Texas-based manufacturer of specialty chemicals announced before the start of trading that its fiscal second-quarter earnings were $0.14 per share, compared with $0.13 per share a year earlier.
Elsewhere, Ocean Power Technologies, Inc. (Nasdaq:OPTT), which develops technology generating electricity from ocean waves, reported before the trading that its third-quarter loss swelled to $4 million from a loss of $1.5 million a year earlier. Shares are down more than 10%.
Shares of ParkerVision Inc. (Nasdaq:PRKR) are also seeing red. The operator of wireless technologies and products said before the opening that its fourth-quarter net loss widened to $4.7 million, or $0.19 per share, compared with a net loss of $3.4 million, or $0.14 per share, a year earlier.
