Bear Stearns (BSC), one of the major US Financial companies, lost half its value intraday today on concerns that the Fed’s recent liquidity injection “might not work” for the company.

Instantly, the Federal Reserve voted unanimously today to provide cash to help this crisis, and stands ready to inject more as needed.

As reported by Yahoo News, the Federal Reserve issued a two-sentence statement, part of which said, “The Federal Reserve is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system.”

According to Yahoo, “The plan will provide secured funding to Bear Stearns for an initial period of 28 days, seeking to provide short-term relief for Bear Stearns.”

Furthermore, “The action by the Fed board in Washington represented an endorsement of a rescue effort for Bear Stearns that had already been arranged by JPMorgan and the Federal Reserve’s New York regional bank, [which was] seen as a last-ditch effort to save the investment bank, which on Friday acknowledged its serious financial problems after a week of denials.”

With that news, let’s look at what happened to the stock prior to the news (or let’s see what caused this announcement to happen so quickly):

On to the massive decline in the weekly chart:

Before you start thinking this is a normal decline, realize how large Bear Stearns is to the US Financial markets, and what this might mean for the broader sector.

This is an extremely important development, which shows that investors must always be on guard for catastrophic events (news/fundamentals) in their chosen investment, and also highlights that even long-term investors should use some sort of position liquidation plan (such as an 8% or 10% arbitrary stop-loss, or some other risk control management plan).

At any moment, the unthinkable can happen in the market.