Investors resist panic selling after Bear Stearns bailout

NEW YORK -- The battered stock market finished mixed, avoiding another major leg down. Wall Street is struggling mightily under the weight of Sunday's implosion of Bear Stearns, the nation's fifth-largest investment bank, as well as a financial crisis caused by massive housing and mortgage-related losses that have shaken the foundation of the U.S. financial system.

Heading into Monday's session, with foreign stock markets already down sharply, Wall Street had a crisis of confidence. Jittery investors wondered whether the buyout of Bear Stearns for $2 a share — down from $30 on Friday — and emergency measures by the Federal Reserve to keep the banking system liquid would be enough to restore calm.

The Dow Jones industrial average, which was down almost 200 points, finished up 21 points to 11,972. The Standard & Poor's 500 index fell almost 1%.

Investors sought havens, such as U.S. Treasury bonds and gold, two asset classes deemed good plays during market turmoil. Gold closed above $1,000 for the first time. The yield on the 10-year Treasury note dropped to 3.30% from 3.44% as Treasury prices rose.

It's only one day, but strategists say the fact that stocks didn't crater is a sign that investors, despite their ongoing angst, view Bear Stearns' escape from bankruptcy and moves by the Fed to keep markets functioning smoothly and the economy from lapsing into a serious recession as steps in the right direction.

Jeffrey Kleintop, chief market strategist at LPL Financial, notes that every financial crisis results in some sort of major failure. In 1998, it was the collapse of hedge fund Long-Term Capital Management. In 1990, it was the savings-and-loan crisis. Each time, the market fell about 20% before rebounding. With the market down more than 18% from its October 2007 high, the worst of the current decline could now be priced in.