Investors are bracing for a bad day on Wall Street today as news broke last night that JPMorgan Chase & Co. was buying the nation’s fifth-largest investment bank, Bear Stearns Cos., for just $2 a share, or little more than $236 million.

“You could see panicky, scary trading Monday that initially could drive the Dow down 400 to 500 points,” a San Francisco money manager, Gary Wollin, said yesterday. As of press time last night, the Asian markets were already slipping, with Japan’s benchmark Nikkei stock index sliding more than 3%.

In an attempt to calm today’s markets, the Federal Reserve announced last night it would cut the rate on direct loans to commercial banks by a quarter-point to 3.25%, and extend the maximum term of discount-window loans to 90 days from 30 days.

“Bear Stearns is lucky to get anything for the firm,” a professor of economics at the University of Maryland, Peter Morici, said. “The hidden liabilities and potential lawsuits are huge.”

The stunning announcement of JPMorgan’s acquisition of Bear Stearns for just a fraction of its former value comes on the heels of Friday’s frantic efforts by the Federal Reserve and JPMorgan Chase to bail out the brokerage firm, which sent the Dow skidding 194.65 points. It also sent Bear Stearns’s shares plunging $27 a share or 47.3% to $30. Over the past year, it had traded as high as $159.36.

Officials of both Bear Stearns — which got into hot water because of billions of dollars of losses in securities backed by subprime mortgages — and JPMorgan could not immediately be reached for comment.

In a related development, several requests were made Friday to the Securities and Exchange Commission to investigate trading in both Bear Stearns shares and options to determine whether anyone had illegally traded on inside information, according to sources familiar with the calls. The SEC could not be reached for comment.

A shellacking of the market today “may be the best thing, a washout that will set the stage for a meaningful market recovery,” the associate editor of the Safe Money Report, Michael Larson, said.

But any confidence boost may be short-lived because the puny takeover price of the brokerage raises new questions about the depth and seriousness of the problems of the financial sector, experts said.

“The down game is still in effect on Wall Street and we’re easily headed to Dow 11,000,” Mr. Wollin, who supervises nearly $100 million of assets, said.

Meanwhile, the manager of the Purchase, N.Y.-based Olstein Funds, Robert Olstein, who oversees $1.1 billion of assets, is so convinced that the Bear Stearns disclosure signals a market bottom that he is embarking this week on a buying spree, investing the $75 million remaining in his fund’s cash reserves because he expects a significant market turnaround to kick off within a week.

“This is an outstanding buying opportunity; it’s like taking candy from a baby,” he says. While he does think there will be additional write-offs over the next six months, these are already priced into the market. In fact, “we could soon be entering a period in which stocks will go up on write-off announcements.”

Mr. Olstein also cites attractive market valuations, noting that S&P 500 earnings have doubled since February 1999, yet the market now is lower.

Further, in the same period, price-earning ratios have been cut in half.

In contrast to Mr. Olstein’s optimism is a decidedly cautious note from a former Goldman Sachs strategist, Fred Dickson. “The Fed is doing what it can, but it’s really dangerous out there,” he said.

Mr. Dickson, who is now the chief investment strategist at D.A. Davidson & Co., sees “a very choppy few months ahead, with the Dow trading in a range of 11,300 to 12,300,” versus Friday’s close of 11,951.09.

“Bear Stearns is not alone,” Martin Weiss of Weiss Research said, adding, “This is not the climax of the story. It’s just the beginning.”