U.S. Stocks Begin Sharply Off On Lehman's Demise

NEW YORK (MarketWatch) -- U.S. stocks tanked at Monday's start after Lehman Brothers filed for bankruptcy and Merrill Lynch & Co. Inc.'s sold itself to Bank of America Corp., shaking global markets and fueling worries about the health of other major financial institutions.

"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, chief market strategist at Jefferies & Co.

The Dow Jones Industrial Average plunged 338.14 points to 11,083.85, with all of its 30 components trading in the red, led by American International Group Inc. , off 51.7%.

The S&P 500 shed 36.27 points to 1,215.43, and the Nasdaq Composite declined 53.34 points to 2,207.93.

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.

Treasurys jumped Monday, pushing yields down by the most since September 2001.

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 $5.24 to $95.94 a barrel in electronic trade.

By Kate Gibson