Russell 2000 trims losses

The Russell 2000 (NYSE:IWM) has trimmed some of its earlier losses but is still deep in negative territory.

At 11:51 a.m. ET, the small-cap index was down 10.86 points, or 1.64%, to 652.04. The Dow Jones Industrial Average (INDU) had retreated 59.51 points, or 0.50%, to 11,891.58.

Stocks small and large have pared some of their earlier losses but are still down on news that JPMorgan Chase & Co. (NYSE:JPM) has purchased Bear Stearns (NYSE:BSC) for just $2 per share, according to an announcement on Sunday.

In an effort to keep other investment banks from going bankrupt, which is what would have happened to Bear Stearns, the U.S. Federal Reserve gave JPMorgan $30 billion in special financing to complete the deal. That’s a risky and desperate move because if something goes wrong, it will be the Fed — not JPMorgan — that will absorb the losses.

The U.S. Central Bank also lowered its discount rate, the rate at which it lends funds to commercial banks, to 3.25% from 3.50%, on Sunday.

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