AP
Thursday April 3, 10:21 pm ET
By Martin Crutsinger, AP Economics Writer
Bernanke, Bush Admin. Defend Decision to Rescue Bear Stearns Amid Questions by Lawmakers
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke and the Bush administration on Thursday defended the decision to rescue Bear Stearns amid questions by lawmakers about why the government was helping Wall Street investment houses but not people on Main Street.
Bernanke and Treasury Department Undersecretary Robert Steel said that the consequences to the U.S. economy and financial system would have been far more serious had the government allowed the nation's fifth largest investment house to go bankrupt.
"Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain," Bernanke told the Senate Banking Committee.
The panel conducted a five-hour hearing as lawmakers sought to understand the decisions made during the hectic weekend of March 14-15 after Bear Stearns informed the Fed that it was on the verge of having to file for bankruptcy protection because nervous creditors were demanding to be repaid.
The investment house was purchased by JP Morgan Chase & Co. with assistance from the Fed in the form of a loan backed by $30 billion of Bear Stearns assets. JP Morgan has agreed to absorb the first $1 billion of losses if the value of the assets declines, but taxpayers are at risk for the remaining $29 billion.
Bear Stearns, with a stock price around $150 per share a year ago, was sold for $10 a share, becoming the biggest victim of a severe credit crisis that hit financial markets in August.
That crisis, which was triggered by a prolonged housing slump and cascading mortgage defaults, has made it harder for consumers and businesses to get loans and helped to push the country to the brink of a recession.
Democrats on the Senate Banking Committee questioned why the Fed was willing to put such a large amount of money at risk to protect Wall Street while as many as 3 million homeowners are facing the risk of defaulting on their mortgages with the administration balking at greater efforts to help them.
"Was this a justified rescue to prevent a systemic collapse of financial markets or a $30 billion taxpayer bailout for a Wall Street firm while people on Main Street struggle to pay their mortgages?" Senate Banking Committee Chairman Christopher Dodd asked Bernanke and the other witnesses.
Bernanke said that government's effort was not a bailout for Bear Stearns shareholders, who will suffer big losses, but an effort to protect the financial system and ultimately the entire economy, which could have faced severe consequences from a Bear Stearns bankruptcy.
"The adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy through its effect on asset values and credit availability," said Bernanke. On Wednesday, Bernanke had for the first time raised the possibility that the current economic troubles could push the country into a recession.
Steel said that Treasury Secretary Henry Paulson was actively monitoring four days of marathon negotiations that began after Bear Stearns notified the Fed on March 13 that it was one day away from having to file for bankruptcy protection. Steel said the administration supported the Fed's decisions.
Most of the questions on the deal centered on the value of the assets the Fed is now holding as collateral for the loan.
Bernanke and Timothy Geithner, president of the Fed's New York regional bank, said they believed $30 billion was a valid price for those assets and Bernanke said the central bank could end up making money on the deal as the assets are sold along with interest on the loan.
But some lawmakers questioned whether the Fed had done enough to properly value the Bear Stearns assets and wondered whether the entire episode had set a dangerous precedent for future risky behavior by other investment houses.
"How big do you have to be to be too big to fail?" asked Sen. Jim Bunning, R-Ky. "Who let our entire financial system become so fragile that one failure jeopardizes the health of the entire system?"
Also appearing before the committee were Alan Schwartz, the head of Bear Stearns, and Jamie Dimon, the head of JP Morgan, who described grueling marathon sessions over the weekend as executives searched for the best way out of the crisis.
Schwartz told the panel that Bear Stearns was brought down by "unfounded" market rumors that led to what was essentially a "run on the bank" as Bear Stearns creditors began demanding payment out of fears the company was about to collapse.
"Facing the dire choice of bankruptcy or a forced sale under exigent circumstances, we salvaged what we could to avoid wiping out our shareholders, bondholders and 14,000 employees," Schwartz told the panel.
Dimon took issue with reports that the Fed had taken Bear Stearns' riskiest securities as collateral for the $30 billion loan the central bank made to facilitate the sale, saying that JP Morgan did not "cherry pick" the assets it would keep on its books and that it was critical that the sale be arranged.
"A Bear Stearns bankruptcy could well have touched off a chain reaction at other major financial institutions that would have shaken confidence in credit markets that already have been battered," Dimon told the committee.
Sen. Charles Schumer, D-N.Y., said entire episode pointed out the need to overhaul the government's regulatory system. On Monday, Treasury Secretary Henry Paulson put forward a plan that would scrap the current system of overlapping agencies for three super regulators, giving the Fed greater powers to monitor the safety of the entire financial system.
Dodd said his panel would examine the need for an overhaul of financial regulations but that this exercise, because of its complexity, would have to wait until next year when a new administration is in place.
Federal Reserve: http://www.federalreserve.gov
Friday, April 4, 2008
Tuesday, April 1, 2008
Bank News, Economic Data Boosts Stocks
AP
Tuesday April 1, 4:36 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Surges on UBS and Lehman Brothers Stock News, Better-Than-Expected Economic Data
NEW YORK (AP) -- Wall Street began the second quarter with a big rally Tuesday as investors rushed back into stocks, optimistic that the worst of the credit crisis has passed and that the economy is faring better than expected. The Dow Jones industrials surged nearly 400 points, and all the major indexes were up more than 3 percent.
Financial stocks were among the big winners after Lehman Brothers Holdings Inc. and Switzerland's UBS AG issued new shares to help bolster their balance sheets. With that upbeat news and a fresh quarter ahead of them, investors appear quite willing to make some bets that the worst of the damage from the nation's credit struggles has been felt. Moreover, the banks' moves buttressed the view that financial services companies are taking aggressive action to improve their capital bases and stave off the potential of a collapse similar to Bear Stearns Cos.
Analysts believe there must be a recovery in bank and brokerage stocks to lead major stock indexes higher. Some of the biggest financial players had their biggest moves of the year Tuesday -- Citigroup Inc. shot up 11 percent, JPMorgan Chase & Co. rose 9 percent, and Lehman surged 18 percent.
"Investors have a difficult time making decisions about the stock market if they don't have confidence in major financial institutions, so there's been a lot of sideline cash," said Richard Cripps, chief market strategist for Stifel Nicolaus. "The extreme conditions that we've seen here over the past few months has been missing that confidence ... but that appears to be changing, and we're seeing the response."
Meanwhile, Wall Street got another boost when the Institute for Supply Management said its March index of national manufacturing activity rose to a reading of 48.6 -- indicating a contraction, but a slower one than in February and tamer than many analysts had predicted. Government data on construction spending for February also came in better than expected.
According to preliminary calculations, the Dow rose 391.47, or 3.19 percent, to 12,654.47.
Broader stock indicators also gained sharply. The Standard & Poor's 500 index rose 47.48, or 3.59 percent, to 1,370.18, and the Nasdaq composite index rose 83.65, or 3.67 percent, to 2,362.75.
The advance was in contrast to a lackluster session on Monday, where stocks managed a moderate gain in the final session of a dismal first quarter. Major indexes ended the first three months of 2008 with massive losses, marking the worst period since the third quarter of 2002 when Wall Street was approaching the lowest point of a protracted bear market.
Renewed enthusiasm that the credit crisis might be waning was also felt in the Treasury market, where government securities fell as investors withdrew money to take bets on stocks. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.55 percent from 3.43 percent late Monday.
In addition to hopes about the financial sector, Wall Street was relieved to see the feeble dollar regain some strength against the euro. The euro fell to $1.5596 from $1.5785 late Monday in New York.
And there was also optimism that commodities prices, which have hit historic highs in recent months, have begun to retreat. Crude fell 60 cents to settle at $100.98 on the New York Mercantile Exchange after earlier falling below $100. Meanwhile, gold dropped back below $900 an ounce.
"This is a nice way to begin the second quarter," said Todd Leone, managing director of equity trading at Cowen & Co. "All the financials are up big, and there's a sense that things are turning. We definitely have not seen the last of the credit crisis, but we're getting closer."
The stock rally was underpinned by the announcements from UBS and Lehman Brothers that they are boosting capital by issuing new stock. Shares of banks and brokerages hovered near multiyear lows in recent months as investors feared heavy losses from investments tied to subprime mortgages would be overwhelming.
Earlier this month, widespread concerns about Bear Stearns' financial position forced the investment bank to sell itself at a bargain basement price to JPMorgan in a deal engineered by the Federal Reserve -- and that stoked fears that other investment houses might follow.
JPMorgan rose $4.05, or 9.4 percent, to $47; while Bear Stearns was up 36 cents, or 3.4 percent, to $10.85 -- slightly above the $10 per share acquisition price.
UBS, one of Europe's biggest banks, said it will issue up to $15 billion in new stock and that its chairman, Marcel Ospel, had quit. Investors chose to look past the bank's announcement that it will take a fresh $19 billion write-down due to additional declines in the value of its mortgage assets and other credit instruments, following an $18 billion write-down last year. Its shares surged $4.21, or 14.6 percent, to $33.01 in trading on the New York Stock Exchange.
Lehman Brothers, dogged by speculation it might reveal losses big enough to cripple the company, on Tuesday raised $4 billion of capital on Tuesday to stymie questions about its financial stability. Lehman rose $6.70, or 17.8 percent, to $44.34.
The Russell 2000 index of smaller companies rose 22.67, or 3.30 percent, to 710.64.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to a heavy 1.70 billion shares.
In overseas trade, Tokyo's Nikkei closed up 1.04 percent. There were gains in Europe too, with London's FTSE rising 2.64 percent, Frankfurt's DAX gaining 2.84 percent and Paris' CAC 40 advancing 3.38 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Tuesday April 1, 4:36 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Surges on UBS and Lehman Brothers Stock News, Better-Than-Expected Economic Data
NEW YORK (AP) -- Wall Street began the second quarter with a big rally Tuesday as investors rushed back into stocks, optimistic that the worst of the credit crisis has passed and that the economy is faring better than expected. The Dow Jones industrials surged nearly 400 points, and all the major indexes were up more than 3 percent.
Financial stocks were among the big winners after Lehman Brothers Holdings Inc. and Switzerland's UBS AG issued new shares to help bolster their balance sheets. With that upbeat news and a fresh quarter ahead of them, investors appear quite willing to make some bets that the worst of the damage from the nation's credit struggles has been felt. Moreover, the banks' moves buttressed the view that financial services companies are taking aggressive action to improve their capital bases and stave off the potential of a collapse similar to Bear Stearns Cos.
Analysts believe there must be a recovery in bank and brokerage stocks to lead major stock indexes higher. Some of the biggest financial players had their biggest moves of the year Tuesday -- Citigroup Inc. shot up 11 percent, JPMorgan Chase & Co. rose 9 percent, and Lehman surged 18 percent.
"Investors have a difficult time making decisions about the stock market if they don't have confidence in major financial institutions, so there's been a lot of sideline cash," said Richard Cripps, chief market strategist for Stifel Nicolaus. "The extreme conditions that we've seen here over the past few months has been missing that confidence ... but that appears to be changing, and we're seeing the response."
Meanwhile, Wall Street got another boost when the Institute for Supply Management said its March index of national manufacturing activity rose to a reading of 48.6 -- indicating a contraction, but a slower one than in February and tamer than many analysts had predicted. Government data on construction spending for February also came in better than expected.
According to preliminary calculations, the Dow rose 391.47, or 3.19 percent, to 12,654.47.
Broader stock indicators also gained sharply. The Standard & Poor's 500 index rose 47.48, or 3.59 percent, to 1,370.18, and the Nasdaq composite index rose 83.65, or 3.67 percent, to 2,362.75.
The advance was in contrast to a lackluster session on Monday, where stocks managed a moderate gain in the final session of a dismal first quarter. Major indexes ended the first three months of 2008 with massive losses, marking the worst period since the third quarter of 2002 when Wall Street was approaching the lowest point of a protracted bear market.
Renewed enthusiasm that the credit crisis might be waning was also felt in the Treasury market, where government securities fell as investors withdrew money to take bets on stocks. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.55 percent from 3.43 percent late Monday.
In addition to hopes about the financial sector, Wall Street was relieved to see the feeble dollar regain some strength against the euro. The euro fell to $1.5596 from $1.5785 late Monday in New York.
And there was also optimism that commodities prices, which have hit historic highs in recent months, have begun to retreat. Crude fell 60 cents to settle at $100.98 on the New York Mercantile Exchange after earlier falling below $100. Meanwhile, gold dropped back below $900 an ounce.
"This is a nice way to begin the second quarter," said Todd Leone, managing director of equity trading at Cowen & Co. "All the financials are up big, and there's a sense that things are turning. We definitely have not seen the last of the credit crisis, but we're getting closer."
The stock rally was underpinned by the announcements from UBS and Lehman Brothers that they are boosting capital by issuing new stock. Shares of banks and brokerages hovered near multiyear lows in recent months as investors feared heavy losses from investments tied to subprime mortgages would be overwhelming.
Earlier this month, widespread concerns about Bear Stearns' financial position forced the investment bank to sell itself at a bargain basement price to JPMorgan in a deal engineered by the Federal Reserve -- and that stoked fears that other investment houses might follow.
JPMorgan rose $4.05, or 9.4 percent, to $47; while Bear Stearns was up 36 cents, or 3.4 percent, to $10.85 -- slightly above the $10 per share acquisition price.
UBS, one of Europe's biggest banks, said it will issue up to $15 billion in new stock and that its chairman, Marcel Ospel, had quit. Investors chose to look past the bank's announcement that it will take a fresh $19 billion write-down due to additional declines in the value of its mortgage assets and other credit instruments, following an $18 billion write-down last year. Its shares surged $4.21, or 14.6 percent, to $33.01 in trading on the New York Stock Exchange.
Lehman Brothers, dogged by speculation it might reveal losses big enough to cripple the company, on Tuesday raised $4 billion of capital on Tuesday to stymie questions about its financial stability. Lehman rose $6.70, or 17.8 percent, to $44.34.
The Russell 2000 index of smaller companies rose 22.67, or 3.30 percent, to 710.64.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to a heavy 1.70 billion shares.
In overseas trade, Tokyo's Nikkei closed up 1.04 percent. There were gains in Europe too, with London's FTSE rising 2.64 percent, Frankfurt's DAX gaining 2.84 percent and Paris' CAC 40 advancing 3.38 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Monday, March 31, 2008
Stocks Gain on Last Day of Quarter
AP
Monday March 31, 7:49 pm ET
By Tim Paradis, AP Business Writer
Stocks Rise to Finish Weak First Quarter; Chicago PMI Tops Wall Street's Forecast
NEW YORK (AP) -- Wall Street managed a moderate gain in the final session of a dismal first quarter Monday, but stock prices and the major indexes still ended the first three months of 2008 with massive losses, the casualties of the still continuing credit crisis. The Standard & Poor's 500 index, the benchmark for many widely held investments such as mutual funds, suffered a loss for the quarter of nearly 10 percent.
It was the worst quarter for the major indexes since the third quarter of 2002, when Wall Street was approaching the lowest point of a protracted bear market.
The blip upward came from a better-than-expected reading in the Chicago Purchasing Managers Index, which is considered a precursor to the Institute for Supply Management's manufacturing survey on Tuesday. The index rose to 48.2 in March from 44.5 a month earlier; economists had been expecting a reading of 47.3, according to Dow Jones Newswires. Though the number topped forecasts, a figure below 50 nonetheless indicates a contraction in manufacturing activity.
The market's reaction, however, was likely not as enthusiastic as it might seem from Monday's gains by the major indexes. Volume was light, which tends to skew price movements.
It was a difficult quarter on Wall Street, with financial companies' ongoing credit market losses and the flagging economy wiping out many investors' appetite for stocks. While the market saw a number of up days during the quarter, the overall trend was sharply lower, with reports of asset write-downs and shaky financial companies pummeling the market -- in particular, the near-collapse of Bear Stearns Cos. in mid-March.
Investors didn't show a strong reaction Monday to a government plan to overhaul the way Wall Street is regulated. The 218-page plan would give the Federal Reserve increased power to protect the stability of the entire financial system while merging day-to-day supervision of banks into one agency, down from five under the existing system.
Scott Wren, senior equity strategist for A.G. Edwards & Sons, said many investors appeared to be focused on economic data due this week on the manufacturing and service sectors as well as employment. Investors are prepared for weak economic data, he said, but could become unnerved if there is unwelcome corporate news.
"The market is already pricing in a ton of bad economic news. Bad economic news is not going to drive the market. What's going to drive the market is headline news," he said.
On the last day of the quarter, the Dow Jones industrial average rose 46.49, or 0.38 percent, to 12,262.89.
Broader stock indicators also rose. The S&P 500 index advanced 7.48, or 0.57 percent, to 1,322.70, and the Nasdaq composite index rose 17.92, or 0.79 percent, to 2,279.10.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 4.02 billion shares compared with 3.59 billion shares traded Friday.
When investors open their quarterly brokerage account or 401(k) statements, what they see will be painful. For the quarter, the Dow fell 7.55 percent, the victim of a series of triple-digit plunges. The S&P 500 declined 9.92 percent, while the Nasdaq, whose smaller company stocks are seen as more vulnerable to economic problems, fell 14.07 percent.
The quarterly performance was the worst since the July-September period of 2002, when the aftermath of the dot-com bust, recession, the 9/11 terror attacks and corporate wrongdoing combined to send stocks spiraling downward. At that time, the Dow lost more than 16 percent, the S&P 500 tumbled nearly 18 percent and the Nasdaq fell almost 20 percent.
Many analysts have suggested that the market has been seeking a bottom in recent weeks. But it will take some time -- and a long period of at least stable trading -- before anyone can feel secure that Wall Street is ready to resume an upward track.
One reason for the uneasiness is that many on Wall Street expected the first quarter to be much stronger for stocks than it turned out to be. The theory was that big financial firms had taken their hits in the final three months of 2007. However, as the first quarter has shown, the fallout from investments in risky and possibly worthless mortgage-backed securities has continued along with the uncertainty in the credit markets.
The Fed, with a series of interest rate cuts and steps to make more credit available to banks and investment houses, helped restore some sense of calm to the Street. However, worries about recession and the health of consumers have also undermined the market's attempts to recover, and as recently as last week, bad economic news sent stocks tumbling.
The dollar was mixed against other major currencies, while light, sweet crude fell $4.04 to settle at $101.58 on the New York Mercantile Exchange. Gold fell $14.40 to finish at $916.20 an ounce on the Nymex.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.42 percent from 3.45 percent late Friday.
Merck & Co. fell $6.56, or 15 percent, to $37.95 and Schering-Plough Inc. declined $5.06, or 26 percent, to $14.41 after medical researchers said the companies' joint cholesterol drug, Vytorin, failed to improve heart disease. The researchers' findings, published by the New England Journal of Medicine, urged a return to more established treatments for cholesterol. Merck is one of the 30 stocks that comprise the Dow industrials and, as a result, dragged on the blue chips.
Citigroup Inc. rose 59 cents, or 2.8 percent, to $21.42 after announcing plans to split its consumer banking unit from its credit card business as part of a broader reorganization to cut costs and simplify the large financial institution's structure. The company suffered billions of dollars in losses from investments in poor-quality mortgages.
The Russell 2000 index of smaller companies rose 4.79, or 0.70 percent, to 687.97.
Overseas, Japan's Nikkei stock average fell 2.30 percent. Britain's FTSE 100 closed up 0.16 percent, Germany's DAX index fell 0.38 percent, and France's CAC-40 rose 0.24 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Monday March 31, 7:49 pm ET
By Tim Paradis, AP Business Writer
Stocks Rise to Finish Weak First Quarter; Chicago PMI Tops Wall Street's Forecast
NEW YORK (AP) -- Wall Street managed a moderate gain in the final session of a dismal first quarter Monday, but stock prices and the major indexes still ended the first three months of 2008 with massive losses, the casualties of the still continuing credit crisis. The Standard & Poor's 500 index, the benchmark for many widely held investments such as mutual funds, suffered a loss for the quarter of nearly 10 percent.
It was the worst quarter for the major indexes since the third quarter of 2002, when Wall Street was approaching the lowest point of a protracted bear market.
The blip upward came from a better-than-expected reading in the Chicago Purchasing Managers Index, which is considered a precursor to the Institute for Supply Management's manufacturing survey on Tuesday. The index rose to 48.2 in March from 44.5 a month earlier; economists had been expecting a reading of 47.3, according to Dow Jones Newswires. Though the number topped forecasts, a figure below 50 nonetheless indicates a contraction in manufacturing activity.
The market's reaction, however, was likely not as enthusiastic as it might seem from Monday's gains by the major indexes. Volume was light, which tends to skew price movements.
It was a difficult quarter on Wall Street, with financial companies' ongoing credit market losses and the flagging economy wiping out many investors' appetite for stocks. While the market saw a number of up days during the quarter, the overall trend was sharply lower, with reports of asset write-downs and shaky financial companies pummeling the market -- in particular, the near-collapse of Bear Stearns Cos. in mid-March.
Investors didn't show a strong reaction Monday to a government plan to overhaul the way Wall Street is regulated. The 218-page plan would give the Federal Reserve increased power to protect the stability of the entire financial system while merging day-to-day supervision of banks into one agency, down from five under the existing system.
Scott Wren, senior equity strategist for A.G. Edwards & Sons, said many investors appeared to be focused on economic data due this week on the manufacturing and service sectors as well as employment. Investors are prepared for weak economic data, he said, but could become unnerved if there is unwelcome corporate news.
"The market is already pricing in a ton of bad economic news. Bad economic news is not going to drive the market. What's going to drive the market is headline news," he said.
On the last day of the quarter, the Dow Jones industrial average rose 46.49, or 0.38 percent, to 12,262.89.
Broader stock indicators also rose. The S&P 500 index advanced 7.48, or 0.57 percent, to 1,322.70, and the Nasdaq composite index rose 17.92, or 0.79 percent, to 2,279.10.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 4.02 billion shares compared with 3.59 billion shares traded Friday.
When investors open their quarterly brokerage account or 401(k) statements, what they see will be painful. For the quarter, the Dow fell 7.55 percent, the victim of a series of triple-digit plunges. The S&P 500 declined 9.92 percent, while the Nasdaq, whose smaller company stocks are seen as more vulnerable to economic problems, fell 14.07 percent.
The quarterly performance was the worst since the July-September period of 2002, when the aftermath of the dot-com bust, recession, the 9/11 terror attacks and corporate wrongdoing combined to send stocks spiraling downward. At that time, the Dow lost more than 16 percent, the S&P 500 tumbled nearly 18 percent and the Nasdaq fell almost 20 percent.
Many analysts have suggested that the market has been seeking a bottom in recent weeks. But it will take some time -- and a long period of at least stable trading -- before anyone can feel secure that Wall Street is ready to resume an upward track.
One reason for the uneasiness is that many on Wall Street expected the first quarter to be much stronger for stocks than it turned out to be. The theory was that big financial firms had taken their hits in the final three months of 2007. However, as the first quarter has shown, the fallout from investments in risky and possibly worthless mortgage-backed securities has continued along with the uncertainty in the credit markets.
The Fed, with a series of interest rate cuts and steps to make more credit available to banks and investment houses, helped restore some sense of calm to the Street. However, worries about recession and the health of consumers have also undermined the market's attempts to recover, and as recently as last week, bad economic news sent stocks tumbling.
The dollar was mixed against other major currencies, while light, sweet crude fell $4.04 to settle at $101.58 on the New York Mercantile Exchange. Gold fell $14.40 to finish at $916.20 an ounce on the Nymex.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.42 percent from 3.45 percent late Friday.
Merck & Co. fell $6.56, or 15 percent, to $37.95 and Schering-Plough Inc. declined $5.06, or 26 percent, to $14.41 after medical researchers said the companies' joint cholesterol drug, Vytorin, failed to improve heart disease. The researchers' findings, published by the New England Journal of Medicine, urged a return to more established treatments for cholesterol. Merck is one of the 30 stocks that comprise the Dow industrials and, as a result, dragged on the blue chips.
Citigroup Inc. rose 59 cents, or 2.8 percent, to $21.42 after announcing plans to split its consumer banking unit from its credit card business as part of a broader reorganization to cut costs and simplify the large financial institution's structure. The company suffered billions of dollars in losses from investments in poor-quality mortgages.
The Russell 2000 index of smaller companies rose 4.79, or 0.70 percent, to 687.97.
Overseas, Japan's Nikkei stock average fell 2.30 percent. Britain's FTSE 100 closed up 0.16 percent, Germany's DAX index fell 0.38 percent, and France's CAC-40 rose 0.24 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
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