U.S. Stock Indexes Sharply Off On Lehman's Demise
NEW YORK (MarketWatch) -- U.S. stocks tanked on Monday as Lehman Brothers filed for bankruptcy and Merrill Lynch & Co. sold itself to Bank of America Corp., shaking global markets and fueling worries about the health of other major financial institutions.
"A Lehman bankruptcy is not like an airline bankruptcy, it's not like they can keep flying until they figure it out. Lehman is going away," said Art Hogan, chief market strategist at Jefferies & Co.
Off earlier lows, the Dow Jones Industrial Average was recently down 280.49 points to 11,141.5, with all of its 30 components trading in the red.
American International Group Inc. proved the heaviest weight on the blue-chip index, with shares of the insurance giant recently off 46.1%.
AIG is reportedly seeking support from the Federal Reserve and is possibly in talks with billionaire Warren Buffet. .
In addition to AIG, investors focused on Seattle-based thrift Washington Mutual Inc. , which has entered talks with J.P. Morgan Chase & Co. , but no deal is in place.
"Why can't we get AIG and Washington Mutual taken care of? That is this week's business," said Hogan.
The S&P 500 shed 36.27 points to 1,215.43, with energy and financials fronting losses among all 10 of its industry groups, with the former sector off 5.4% and the latter down 4.2%.
Among the hard hit, shares of Sunoco Inc. fell 12.2%.
The technology-laden Nasdaq Composite declined 36.67 points to 2,224.60.
Volume on the New York Stock Exchange topped 265 million, with decliners racing past advancing issues more than 8 to 1. On the Nasdaq, more than 195 million shares exchanged hands, and for every stock gaining, four were declining.
Final Chapter
Shares of Lehman were down $3.44, or 94.3%, at 21 cents a share, with regulators and company officials moving to reassure individual investors that holdings in accounts at the investment bank would be protected as the company heads into bankruptcy. .
The Chapter 11 filing for bankruptcy protection ends the Wall Street firm's 158-year run, and capped a weekend of negotiations in which potential acquirers backed away from a deal.
"More questions were left unanswered after the weekend, how does this Lehman bankruptcy affect the rest of the industry? We don't have answers for all the tricky questions that come up when somebody has $613 billion in debt and no market capitalization," said Art Hogan,
In the face of the global financial storm, Merrill Lynch agreed to be bought by Bank of America Corp. in an all-stock deal valued at $50 billion. .
Shares of Merrill Lynch gained 30.7%, while those of Bank of America dropped 14.8%.
Safe havens
The dollar declined the most against the Japanese yen in 10 years, but gained against the euro and the British pound on thinking the Federal Reserve would cut interest rates Tuesday.
Treasury prices jumped, pushing yields down the most since September 2001.
Gold futures also rallied as Wall Street's troubles raised demand for safe-haven investments, with the contract for December delivery recently up $14.1 to $778.60 an ounce on the New York Mercantile Exchange. .
Oil futures tumbled to a seven-month low as key refineries in the Gulf of Mexico were spared major damage from Hurricane Ike, with crude for October deliver falling $4.44 to $96.74 a barrel in electronic trade.
By Kate Gibson