Friday, September 12, 2008

Stocks Soar Into the Close, Oil Down, Lehman Buyout Talks

On Thursday, the markets rebounded from a loss earlier in the day to rise sharply at the close on reports that major U.S. investment bank Lehman Brothers (LEH) is shopping itself to possible suitors including Bank of America (BAC) and Barclays (BARC.L).

Oil also dropped nearly $2 to help boost the market as investors seemed to not be as concerned about consumer and business spending thus sending airline and retail shares higher. Oil finished the day by falling $1.71 to $100.87 per barrel down from the all time high in July of $147.

The Dow ended up 164.79 points (1.46%). The S&P 500 closed up 17.01 points (1.38%). The NASDAQ finished up 29.52 points (1.32%).

Lehman Brothers

Lehman and U.S. officials were in intensive discussions about a number of options, including a complete sale, sources with direct knowledge of the talks said. One of the sources said the firm was resisting government intervention.

The Treasury and Federal Reserve were engaged in the talks, which could be completed as soon as this weekend, a second source said. The U.S. government is hoping to avoid spending money on a bailout, another person familiar with the situation told Reuters.

Bank of America or Barclays could be suitors, according to various reports. Bank of America, Barclays and Lehman declined to comment.

Lehman CEO Dick Fuld, long resistant to ceding the firm's independence, has been trying to sell just a part of the 158-year-old firm instead of the whole company, sources familiar with the situation said.

But investors, anxious for some kind of resolution, knocked down Lehman shares by 42% on Thursday as the dearth of information from the company stoked fears some clients and trading partners might take their business to more stable firms.

Six months since the collapse and eventual fire-sale purchase of investment bank Bear Stearns, confidence in the Wall Street business model has faded.

Lehman stock closed down $3.03 at $4.22, and traded as low as $3.20 in after-hours trading. The shares have lost more than three-quarters of their value since Monday and more than 90% since they hit a 52-week high of $67.73 last November.

The problem with Wednesday's announcement from Lehman was that it did not convince investors the firm could sell assets at good prices and raise enough capital to restore confidence in its business.

According to most analysts and reporters, expect an announcement on the future of Lehman in the next few days. Could this be another weekend deal? Stay tuned.

Sources: Reuters, Yahoo!

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