Stocks move up but Lehman still a worry
NEW YORK » Stocks made a sizable comeback yesterday, as investors snapped up some of the financial sector's stronger players and pumped money into the materials and transportation sectors.
The Dow Jones industrial average rose more than 160 points.
A drop in crude below $101 a barrel also helped reverse Wall Street's early losses, particularly among automaker and transportation stocks like railroad CSX Corp., Ford Motor Co. and General Motors Corp.
Early in the day, most bank stocks sold off on nervousness about Lehman Brothers Holdings Inc.'s announcement Wednesday that it plans to sell its investment management unit and spin off its commercial real estate assets.
The company is seeking to raise cash after making bad bets on holdings tied to real estate.
Traders and analysts appeared unimpressed with the steps outlined by the nation's No. 4 investment bank, punishing the stock. Citigroup and Goldman Sachs lowered their ratings on the stock to "hold" from "buy." Lehman fell $3.03, or nearly 42 percent, to close at $4.22.
"The steps they're taking are being seen by Wall Street as too little, too late," said Arthur Hogan, chief market analyst at Jefferies & Co., referring to Lehman. "You're looking at a company that was a $10 billion company last week that is a $3 billion company today."
Still, Lehman is going ahead and shopping itself to possible suitors including Bank of America Corp., Japan's Nomura Securities, France's BNP Paribas, Deutsche Bank AG and Britain's Barclay's Plc, according to bankers and industry executives close to the situation.
Stocks including JPMorgan Chase & Co., Wells Fargo & Co., and even the embattled Washington Mutual Inc. ended up soaring yesterday.
The Dow rose 164.79, or 1.46 percent, to 11,433.71, after falling by as many as 170 points in the early going.
Broader stock indicators rose. The Standard & Poor's 500 index rose 17.01, or 1.38 percent, to 1,249.05, while the Nasdaq composite index rose 29.52, or 1.32 percent, to 2,258.22.
Declining issues outnumbered advancers by about 9 to 7 on the New York Stock Exchange, where consolidated volume came to 6.64 billion shares, up from 6.29 billion shares on Wednesday.
The Russell 2000 index of smaller companies rose 1.84, or 0.26 percent, to 719.00.
Government bond prices ended little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was 3.64 percent, up slightly from 3.63 percent late Wednesday. The dollar was mixed against most other major currencies, while gold prices fell sharply.
Light, sweet crude fell $1.71 to settle at $100.87 a barrel on the New York Mercantile Exchange as a strengthening dollar added to investors' buying power.
In other economic news, the U.S. Commerce Department said the nation's trade deficit jumped in July to the highest level in 16 months as oil imports reached a new high. That offset strong export growth.