Wall Street falls amid Lehman, AIG worries (Reuters)
12.09.2008 22:45 Finance
A more than 6 percent decline in General Electric shares also weighed on the S&P 500 index, offsetting gains by utilities and natural resource companies.
Jitters about additional mortgage losses at American International Group pushed the stock down more than 27 percent, making it the top drag on the Dow.
Lehman also remained in focus as shares hit a 14-year low amid uncertainty about what form a possible deal to rescue the firm would take.
Sources with direct knowledge of the talks said U.S. authorities were in intensive discussions with Lehman on options including an outright sale.
But a source familiar with U.S. Treasury Secretary Henry Paulson's thinking said he is "adamant" no government money be used in any deal to resolve that crisis.
"Lehman is a proxy for the U.S. markets to some extent," said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray in Minneapolis. "Where Lehman goes so will the market in the short term."
The Dow Jones industrial average was down 63.42 points, or 0.55 percent, at 11,370.29. The Standard & Poor's 500 Index was down 2.63 points, or 0.21 percent, at 1,246.42. The Nasdaq Composite Index was down 7.19 points, or 0.32 percent, at 2,251.03.
The S&P index of financial shares fell 0.8 percent, while shares of AIG were down 27.1 percent at $12.83. Lehman shares fell 16 percent to $3.53 after hitting a 14-year low at $3.41.
Any deal to save Lehman would come less than a week after a government bailout of Fannie Mae and Freddie Mac, the biggest providers of U.S. home financing. Bank of America, the No. 2 U.S. bank, has been mentioned as a possible suitor.
"This is as risky and as dicey a time as I've ever seen," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.
Meanwhile, Washington Mutual, under pressure of late on capital concerns, advanced more than 4 percent to $2.95 on Friday after the American Banker reported that JPMorgan Chase was in advanced talks to buy the savings and loan.
The energy sector was a bright spot for an otherwise strained market. U.S. crude oil fluctuated, last trading flat at $100.79 a barrel, though fears about Hurricane Ike and the damage it could do to U.S. oil facilities in the Gulf of Mexico remained a factor.
An index on energy stocks was up 1.7 percent, and shares of Exxon Mobil rose 1.2 percent at $76.47.
Shares of utilities, seen as a defensive play when the broader market struggles, also gained, with an index up 1.1 percent.
On the economic front, the latest data on consumers was mixed. A government report showed retail sales unexpectedly fell in August, adding to concerns about the impact of the housing slump and a faltering labor market on household spending.
That weighed on shares of iPod maker Apple Inc, which fell 3.1 percent to $147.95 and was a top drag on the Nasdaq.
But U.S. consumer confidence soared unexpectedly to an eight-month high in September as lower fuel prices soothed inflation fears and made Americans more hopeful about the economy, the Reuters/University of Michigan Surveys of Consumers showed.
(Reporting by Steven C. Johnson; Additional reporting by Richard Leong and Ellis Mnyandu; Editing by James Dalgleish)
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