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Israeli stocks tumbled yesterday on heavy turnover as U.S. and European shares wilted after Bear Stearns' implosion late last week and the investment bank's takeover for a meager $236.2 million by JPMorgan Chase & Co. Just how bad is that price? Well, it's about the same at which Bank Hapoalim last year sold its mutual funds management company PKN (pronounced "pecan") to the private equity fund Markstone, which owns the Prisma investments. It's also about 10 percent of Bear's value not long before.

Hoping to stem the tidal wave of red ink, the U.S. Federal Reserve lowered its discount rate, at which it lends directly to banks, just ahead of its scheduled monetary meeting opn March 18. The U.S. central bank cut its rate by 0.25% to 3.25%, but global fears that the world's strongest economy will sink into a dire recession led bond prices to surge as investors fled for safety. European and Asian stocks reeled. Japan's Nikkei stock average fell 3.71%, while Hong Kong's Hang Seng index dropped 5.18%. Moving on to Europe, the losses built up momentum as the day wore on. Ultimately, London's FTSE 100 fell 3.86%, Germany's DAX index dropped 4.18% and France's CAC-40 lost 3.51%.

Here at home, the leading TA-25 index has lost more than 9% over three business days. The sharp retreat in Asian and European markets, and above all, fear of more negative developments in the U.S., overcame whatever local optimism had been lingering. Trading in Tel Aviv started with a moderate retreat of 1% as players waited for the sessions in Europe to start.

When they did, with a drop of about 2%, Tel Aviv's players began to sweat, especially as the Tel Aviv Stock Exchange has been closing early because of sanctions by its workers (See page 11).

The locals (and any foreigners playing the local market) had to wrap up business by 2:15 P.M. instead of 5:30 P.M., which added to the sense of stress and urgency to sell, traders said. They also had no chance to trade in parallel with Wall Street, though there were naturally indications that trading there would start with steep losses. Players have clearly adjusted to the shorter trading day: Total turnover was heavy at NIS 2.5 billion, well above the norm in the last few weeks.

David Katash, manager of Apex Mutual Funds, says that part of the problem - general and notably in real estate stocks - is that investors have no idea how to price shares.

"We have real estate stocks trading at multiples of 0.6 times their shareholders equity," which is low, Katash says. Nobody has the slightest clue how much value these companies may have to write off as the global property markets wilt, just to name one problem. It could be a lot. Some think it won't be significant at the end of the day. Either way, yesterday the Tel Aviv Real Estate-15 index dived 6% to a level last seen at the start of 2006. From the start of the year the index, which had been a market darling in 2007, has lost 22% of its value.

Two psychological barriers were shattered yesterday. One is that the TA-25 index fell below 1,000 points. The other is that the TA-100 index fell below 900 points. In fact, the TA-25 index - the 25 biggest companies listed in Tel Aviv (that also meet the listing criteria) - tumbled 4% to 964 points, its lowest point in a year. From January 1, 2008, the TA-25 index has lost 19%.

The TA-100 index retreated by 4.1% to 887 points. This index of the 100 biggest stocks not listed on the TA-25 index has lost 23% this year. The TelTech-15 index fell by a relatively modest 1.5%.

The meager price that the bruised remains of Bear Stearns commanded triggered a slide in bank stocks worldwide. Here at home, shares of Bank Hapoalim tumbled 7.7%, bringing their loss from the year's start to 35%. Of course, Hapoalim is a special case even in this growling market, because among Israel's banks it had relatively heavy exposure to the U.S. subprime meltdown and the ensuing credit crisis. But Bank Leumi was also stung by the sour mood: Its stock fell 6.6%.

As said, the Real Estate-15 index lost 6%, weighed down by heavyweight Africa Israel, which shed 4.8%.

Another favorite stock, Israel Chemicals, tumbled 9.4% even though potash prices, which are cardinal to its fortunes, have been strong.

Shares of drugs giant Teva Pharmaceutical Industries fell 2.8% to their lowest point in roughly a year.

Many of the American stocks regained at least some ground after trading. Lehman Bros for instance was trading at a loss of 2.7% as of writing, and Merrill Lynch was trading at a gain of 1.63% after hours.