Bear Stearns offer props up the US Market

JP Morgan Chase increases its bid to $10 a share for the troubled Bear Sterns

Bear Sterns news and a better-than-expected report from the troubled housing sector helped US Market register comfortable gains today, Monday, 24 March, 2008. JP Morgan Chase lifted its offer to buy Bear Sterns at $10/share from its previous $2/share. This Helped Bear Sterns stock soar by more than 85% today and also gave the financial sector an overall good boost. Nine out of ten economic sectors finished with a gain. The utilities sector, known for its defensive orientation, was the lone loser.

In the mornings session, the Dow was up by more than 214 points. But in the second half, financial sector gave up its gains to a large extent. At the end, The Dow Jones industrial Average ended the day with a huge gain of 187 points at 12,548. The Nasdaq Composite Index, finished higher by 68.6 points at 2,326. S&P 500 finished higher by 20 points at 1,350.

Twenty-seven out of thirty Dow stocks ended in the green today. Citigroup led the group of Dow winners.

The day started with some good news in other sectors also. The Federal Housing Finance Board authorized the Federal Home Loan Banks to increase their purchases of agency mortgage backed securities. The expanded authority - which could provide more than $100 billion in additional liquidity to mortgage-backed securities is limited to Freddie Mac and Fannie Mae securities.

But the day’s major economic release was the existing home sales data. As per reports by National Realtors, February existing home sales rose 2.9% to a seasonal adjusted annualized rate of 5.03 million. The prior reading stood at 4.89 million, and market expected a decline to 4.85 million.

The interesting part about the data was that the 2.9% rise in existing home sales marked the first monthly gain in a year. Inventories are still high at 9.6 months, but are at the lowest level since August.

All Indian ADRs ended in green today. HDFC Bank and ICICI Bank were the two topmost gainers. The two ADRs gained 8% and 13% respectively today.

Crude prices closed modestly lower today as the dollar continued to rally. Crude-oil futures for light sweet crude for May delivery closed at $100.86/barrel (lower by $0.98/barrel or 1%) on the New York Mercantile Exchange. Prices earlier dropped to $99.5 and rose to a high of $102.4. Crude prices are 62% higher on a yearly basis.

In the currency market today, the dollar pared euro gains but extended its rise against the yen, as stocks rallied after data showed U.S. February existing homes sales beat expectations and rose for the first time in seven months. The dollar index, which measures the greenback against a basket of six currencies, was at 72.93, up from 72.87 before the data. But losses in crude price were limited due to the stronger than expected economic data.

Volume on the New York Stock Exchange neared 4.4 billion, and advancing stocks outran those declining 5 to 1. On the Nasdaq, 2.3 billion shares changed hands, and advancers led decliners nearly 3 to 1.

Tomorrow, a few companies will post their latest earnings result before the opening bell. Other than that, Conference Board's Consumer Confidence data will be released at 10:00 ET. The housing sector will remain in the spotlight with the S&P Case/Shiller Home Price Index due for release.