Bear market reality check revisits Wall Street

By Jennifer Ablan

NEW YORK (Reuters) - There's less talk on Wall Street that the sky is falling after the bailout of Bear Stearns CosBSC.N in mid-March since many investors and strategists saw that as the climax of the financial crisis.

That doesn't mean, however, that a bear market hasn't grabbed the Street by the throat: Dismal results from Fannie Mae (FNM.N: Quote, Profile, Research), Legg Mason Inc (LM.N: Quote, Profile, Research), Lazard Ltd (LAZ.N: Quote, Profile, Research), and UBS (UBSN.VX: Quote, Profile, Research) on Tuesday punctuate that the credit turmoil is far from over and even more painful than anybody had imagined.

Fannie Mae, the major entity created during the Great Depression to provide liquidity to housing, continues to be enveloped by the deterioration in the credit and housing markets, reporting its third quarterly loss and unveiling plans to raise $6 billion in added capital.

Money manager Legg Mason, home to famous value investor Bill Miller, and Lazard, the investment bank led by Bruce Wasserstein, both delivered bad news to investors, with Legg Mason recording a quarterly loss and Lazard reporting a 71 percent drop in earnings.

And while that seems to be enough gloom for the day -- or the week -- the Swiss bank UBS said it plans to slash 5,500 jobs and sell $15 billion in risky mortgage assets to BlackRock Inc (BLK.N: Quote, Profile, Research) to offset first-quarter losses of almost $11 billion.

"The financial sector is in serious recession," said James Kochan, fixed-income strategist at Wells Fargo Funds Management, in Menomonee Falls, Wisconsin.

Stocks rebounded strongly last month from a miserable March, as the Fed flooded the financial system with cash in the wake of Bear Stearns' collapse.

April brought the best monthly percentage gain in the Standard & Poor's 500 index since December 2003 and the Dow Jones Industrials average had its best monthly percentage increase in a year.