Stocks fall on worries about Lehman, financials
NEW YORK -- Stocks declined but pulled off their lows Thursday as investors dumped shares of Lehman Brothers Holdings Inc. and other financial names over worries it is becoming harder for them shore up their balance sheets. Gains in areas like transportation stocks helped dampen the market's decline.
Wall Street's latest unease about the financial sector follows Lehman'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.
But 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 $2.73, or 38 percent, to $4.52.
Other financials also logged steep declines as investors worried about the health of balance sheets across Wall Street. American International Group Inc. fell $2.74, or 16 percent, to $14.76 and Washington Mutual Inc. lost 29 cents, or 12 percent, to $2.03. Among other financials, Merrill Lynch & Co. fell $3.41, or 15 percent, to $19.89 and Morgan Stanley declined $1.45, or 3.7 percent, to $37.47.
"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."
"They've got a very tough road ahead of them regardless of whether they get some assets sold off," he said.
In late morning trading, the Dow Jones industrial average fell 42.58, or 0.38 percent, to 11,226.34 after falling as much as 170 points in the early going.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 2.83, or 0.23 percent, to 1,229.21. The S&P's decline left it not far above its July 15 trading low of 1,200.44 and its closing low of 1,214.91. A move below these levels could add to Wall Street's pessimism.
The Nasdaq composite index slipped 1.42, or 0.06 percent, to 2,227.28.
Bond prices rose as stocks pulled back. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.62 percent from 3.63 percent late Wednesday. The dollar was higher against most other major currencies, while gold prices fell sharply.
