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Shares of

JPMorgan Chase

(JPM) - Get JP Morgan Chase & Co. Report

gave back some gains on Thursday news that the bank that rescued

Bear Stearns

( BSC) just raised $6 billion in fresh capital.

Having rallied 3.3% on Wednesday after pleasing Wall Street with its first-quarter earnings results, JPMorgan shares shed as much as 1.8% Thursday after the firm tapped the credit markets with a preferred share offering. A source familiar with the situation said the bank usually raises some $40 billion to $45 billion a year in bond offerings, but the latest action was a more expensive way of raising capital that would boost its Tier 1 capital ratio without diluting shareholders.

The source said the action was not a defensive effort to raise capital, but more of an opportunistic move to take advantage of the market's confidence in JPMorgan and a favorable pricing environment.

T.J. Marta, fixed income strategist with RBC Capital Markets, says "all the banks need to raise capital in the face of this credit crisis, so this kind of move doesn't come as a surprise."

JPMorgan's pullback comes as investment bank

Merrill Lynch

( MER) reported its

third-consecutive quarterly loss

before Thursday's opening bell, featuring $6.6 billion in write-downs on bad debt and a plan to cut 4,000 jobs.

"This was about as difficult a quarter as I've seen in my 30 years on Wall Street," said Merrill CEO John Thain. "We are planning for a slower and more difficult next couple of months and probably next couple of quarters, but are also hopeful for our full year 2008 results."

Merrill missed expectations on Wall Street, but its shares climbed on news of its aggressive cost-cutting measures. Shares of Merrill were recently up $1.13, or 2.5%, to $46.02.

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Other financial stocks were also climbing despite a broader sell-off in equities, with


(C) - Get Citigroup Inc. Report

shares up 20 cents, or 0.8%, to $23.64; and

Lehman Brothers

( LEH) adding 56 cents, or 1.3%, to $42.28.

For its part, JPMorgan reported Wednesday that its first-quarter profits were cut in half amid the persistent credit crunch. It took $2.6 billion worth of writedowns related to leveraged loans as well as prime, Alt-A and subprime mortgages. It also added a $2.5 billion provision to protect itself against further loan losses, bringing its total allowance for credit losses to $12.6 billion.

Despite the setbacks, JPMorgan remains among the financial industry's star in weathering the credit crunch. Its results actually beat expectations on Wall Street and inspired a rally in the stock market that sent the

Dow Jones Industrial Average

up 248 points Wednesday on hopes that financials had finally reached a bottom.

Furthermore, JPMorgan bolstered its profile as a financial heavyweight in the first quarter by getting the nod from the

Federal Reserve

to buy Bear Stearns in a fire sale deal of $10-a-share. The central bank orchestrated the deal and backstopped $29 billion in Bear's riskiest paper to prevent a systemic breakdown in the financial markets.

The deal added a layer of uncertainty to JPMorgan CEO Jamie Dimon's financial fortress. The company said its Tier 1 capital ratio was 8.3% at the end of the quarter -- a respectable level, but one Wall Street analyst cautioned investors to be wary of the bank in the wake of its acquisition.

"My analysis at the moment is that this company is having a great deal of difficulty dealing with the current economic downturn," said Punk, Ziegel & Co. analyst Richard Bove in a post-earnings note to clients.

JPMogran shares more recently were down a penny to $44.95.