Bear Steaks: BSC, JPM, LEH

When a rival offers to buy you out for less than the cost of your headquarters, you know it's not going to be a good morning.

On Friday, March 14th, shares of Bear Stearns (BSC | Quote | Chart | News | PowerRating) opened north of $54 a share and closed south of $30. This sharp sell-off was brought on by fears that one of the most historic investment banks on Wall Street was facing potential bankruptcy. The culprit? Over-exposure to the subprime mortgage market.

Monday morning Bear opened at $3.17. The day before, Bear Stearns CEO had been confronted with a bold offer from rival and no less venerable investment bank, J.P. Morgan (JPM | Quote | Chart | News | PowerRating): $2 a share.

The buyout was coordinated with the U.S. Treasury and Federal Reserve, both of which swiftly approved the transaction. Given the colossal nature of the stock's breakdown, there were the usual calls for government investigation of allegedly suspicious options activity in advance of J.P. Morgan's stunning offer on the weekend.. But none of that obscures the issue at hand: Bear Stearns as we knew it will soon enough cease to exist.

Talking with Larry Connors, founder and CEO of TradingMarkets.com Monday morning, he shared stories of the shock many of the people in the financial community had as the news sunk in. Of all the investment bankers on Wall Street, went the sentiment, nobody thought that Bear Stearns would be one to go under. More so even than Goldman Sachs, they thought, Bear Stearns was a survivor.

Active investors and long-term traders who followed our PowerRatings would have known for weeks, if not months that Bear Stearns was not a stock worth holding. The stock's Long Term PowerRating slipped to an "avoid buying" 3 on March 12, with the stock closing just north of $61, days before the break on Friday and the far more severe collapse on Monday.

Were there other Bears out there? An investing nation turned its nervous eyes toward Lehman Brothers (LEH | Quote | Chart | News | PowerRating) on Monday, with sellers trampling each other en route to the exits. But Lehman would have none of it, as it reported profits this week that while down were nowhere near as poor as predicted. And in a market supersaturated with bad news, that not-so-bad report seemed to be more than enough to send shares of Lehman sharply higher over the balance of the week—after their "sympathy collapse" along with Bear Stearns on Monday.

The Wright Stuff

Has the market correction claimed another victim?

We won't know for months whether or not the latest scandal of the World's Most Anticipated Recession Correction, the one involving Democratic presidential hopeful Barak Obama and his controversial former pastor, Jeremiah Wright is yet another example of how downturns in the market tend to reflect downturns in the mood of the country in general and often hint at tough times for formerly high-flying personalities.

The spontaneous combustion of Eliot Spitzer's career was the last exhibit in the correction's gallery of loathing. For the market's bad mood to take down a presidential candidate would be an even greater coup, a true demonstration of the sort of social disruptions that bear markets tend to help make happen.

My suspicion is that Obama will be "the one that got away" as far as the bear claws are concerned. Obama may or may not be elected President of the United States in November (his winning of the Democratic party nomination being all but assured at this point), But the likelihood that the market has bottomed, almost simultaneously with the Illinois senator's widely-commended speech on race relations, bodes as well for him as it does for the all-too-anxious owners of stocks.

Stocks in the News

Headlines this week included news of the end of a venerable investment bank, good profit news from two of America's most well-known brands, and the biggest IPO in financial history.

Bear Stearns agreed to a historic buyout by rival J.P. Morgan for the price of $2 per share or $236.2 million.

In the midst of a volatile, churning stock market, the initial public offering in shares of VISA (V | Quote | Chart | News | PowerRating) was the biggest ever. Gross proceeds were in excess of $19 billion.

Both Goldman Sachs (GS | Quote | Chart | News | PowerRating) and Lehman Brothers (LEH | Quote | Chart | News | PowerRating) heartened investors with news that their declining profits were not the prelude to a Bear Stearns-like collapse.

Washington Mutual (WM | Quote | Chart | News | PowerRating) saw the rating on its unsecured credit slashed to near junk status this week by Moody's.

Athletics shoe and clothing giant Nike (NKE | Quote | Chart | News | PowerRating) announced that profits were up strongly due to overseas demand, and favorable exchange rates.

FedEx (FDX | Quote | Chart | News | PowerRating) provided investors with a fairly downcast outlook as part of its announcement of lower profits even as revenues had increased.

What to Look for Next Week

Monday: 3-, 6-Month Bill Auction
Tuesday: Construction Spending / ISM Manufacturing Index
Wednesday: ADP Employment Report / Factory Orders
Thursday: Jobless Claims / Money Supply
Friday: Treasury STRIPS

Best Performing Stocks (PR 8-10) of the Last Five Days

Here are some of the best performing, high Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 8 or 9.

Johnson & Johnson (JNJ@JNJ | Quote | Chart | News | PowerRating). Long Term PowerRating 9
General Mills (GIS@GIS | Quote | Chart | News | PowerRating). Long Term PowerRating 9
Abbott Laboratories (ABT@ABT | Quote | Chart | News | PowerRating). Long Term PowerRating 8
General Electric (GE@GE | Quote | Chart | News | PowerRating). Long Term PowerRating 8
Danaher Corporation (DHR@DHR | Quote | Chart | News | PowerRating). Long Term PowerRating 8

Worst Performing Stocks (PR 1-3) of the Last Five Days

Here are some of the worst performing, low Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 2 or 1.

Crocs, Inc. (CROX@CROX | Quote | Chart | News | PowerRating). Long Term PowerRating 2
Lehman Brothers Holdings Inc. (LEH@LEH | Quote | Chart | News | PowerRating). Long Term PowerRating 2
NVIDIA Corporation (NVDA@NVDA | Quote | Chart | News | PowerRating). Long Term PowerRating 2
Stillwater Mining Company (SWC@SWC | Quote | Chart | News | PowerRating). Long Term PowerRating 2
China Telecom (CHA@CHA | Quote | Chart | News | PowerRating). Long Term PowerRating 1

David Penn is Senior Editor at PowerRatings.net.