Stocks down, but off lows

NEW YORK (CNNMoney.com) -- Stocks cut losses Monday morning, with the Dow briefly turning higher, as shares of JP Morgan Chase rallied on bets that its bargain basement purchase of Bear Stearns was a good move for the company.

Bond prices surged, lowering corresponding yields, as investors sought the comparative safety of government debt. The dollar plunged to a 12-1/2 year low versus the yen and hit another all-time low versus the euro.

The Dow Jones industrial average (INDU) was down about 0.2% 90 minutes into the session. The broader Standard & Poor's 500 (SPX) index tumbled 0.8%, and the Nasdaq composite (COMP) shed 1.2%.

Stocks tumbled at the open after the sale of Bear Stearns and emergency moves by the Federal Reserve exacerbated fears about the fallout in financial markets.

But the declines were not as aggressive as analysts had been expecting, and select financial shares managed to bounce back as the morning continued.

Bear Stearns. Stocks tumbled Friday on news that Bear Stearns needed emergency funding to avoid a collapse, and fears about the financial sector deepened over the weekend.

On Sunday, JP Morgan Chase agreed to buy Bear for just $2 a share, or $236 million. That's less than 4% of Bear Stearns' value at the close of trading on Thursday. On Friday, Bear shares plunged 47% to close at $30 a share. One year ago, the stock was worth nearly $160. (Full story).

Bear Stearns (BSC, Fortune 500) shares tumbled 84% to less than $5 a share on Monday. But JPMorgan Chase (JPM, Fortune 500), a Dow component, rallied 10.2%.

Federal regulators accelerated the deal-approval process and the Federal Reserve provided $30 billion in funding, the latest in the central bank's series of drastic steps to protect the financial markets amid the housing and credit crises.

Also on Sunday, the Fed cut the discount rate, a short-term bank lending rate, to 3.25% from 3.5%, as a means of making more cash available to strapped banks. The move occurred just two days ahead of the Fed's regularly scheduled policy meeting.

The central bank could cut the fed funds rate, a consumer lending rate, by as much as a full percentage point at that meeting, traders estimate. The fed funds rate currently stands at 3%.

The Fed also announced Sunday it had created another lending facility that allows big Wall Street firms access to short-term funding. (Full story).

A variety of financial stocks initially tumbled as investors wondered which company would be next to face a fate similar to that of Bear Stearns, with current speculation turning to Lehman Brothers. (Full story).

However, by mid-morning, select financials had turned higher, helping the broader market trim losses.

In global trade, Asian markets plunged and European markets fell in afternoon trading.

Other markets. U.S. light crude oil for April delivery fell $3.31 to $106.90 a barrel on the New York Mercantile Exchange after touching an all-time high near $112 in electronic trading.

COMEX gold for April delivery added $13 to $1,012.50 an ounce after hitting an all-time high of $1,017.50 an ounce earlier.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.39% from 3.44% late Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell to a fresh all-time low versus the euro and again touched a more than 12-year low against the yen.