Rumor Bites Lehman Brothers And Weighs Down Rest of Market
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Wednesday, June 4, 2008; Page D04
NEW YORK, June 3 -- Wall Street fell sharply for a second consecutive session Tuesday as investors grew more worried that the financial sector was still suffering badly from the credit crisis.
The Dow Jones industrial average fell 100.97, or 0.81 percent, to 12,402.85, after falling more than 160 points earlier. The blue chips have lost 235 points since Monday. Broader market indicators were also lower. The Standard & Poor's 500-stock index dropped 8.02, or 0.58 percent, to 1377.65, and the Nasdaq composite index fell 11.05, or 0.44 percent, to 2480.48.
The market held steady for much of the session, then tumbled in the early afternoon as concerns about financial companies intensified. Reports that Lehman Brothers planned to raise $4 billion in capital later expanded into a rumor that it had approached the Federal Reserve to borrow money.
Lehman Treasurer Paolo Tonucci refuted the speculation, but the damage had been done. Lehman fell as much as 14.5 percent and dragged down other banks and brokerages and ultimately the rest of the market.
The Lehman rumors followed a spate of bad news about other financial companies on Monday, including a downgrade of the nation's four biggest investment banks by rating agency Standard & Poor's.
Separately, anxiety about weak May automotive sales and fresh concerns about inflation also cut into investor appetite for stocks.
Early in the session, comments from Federal Reserve Chairman Ben S. Bernanke seemed to support the market. In a speech via satellite to a conference in Barcelona, Bernanke reiterated expectations that the economy would rebound during the second half of the year due to interest rate cuts, Fed loans to banks and tax rebates. He also said the economy faced headwinds with rising prices for food and energy -- a signal that interest rates will remain on hold.
Bernanke's comments set off sharp reactions across other markets. The biggest response came in the dollar, which rallied after the Fed chief said he would remain "attentive" to the sagging currency because of its impact on inflation.
Movers
Lehman Brothers closed down $3.22, at $30.61.
