Stocks wavered Friday as steep declines by some of Wall Street's marquee firms and other financials outweighed gains in the energy, utilities and materials sectors.
Beyond worries that big financial companies like Lehman Brothers Holdings Inc. could be felled by bad debt on their balance sheets, an unexpected slowdown at cash registers last month weighed on shares of retailers and other consumer discretionary stocks.
But the troubles of the financial sector dominated the session as investors tried to glean insights into Lehman's race to sell itself or otherwise regain Wall Street's confidence. The company's shares have spiraled lower this week, heaping pressure on executives at the No. 4 U.S. investment bank to line up a buyer or source of fresh cash.
Lehman shares _ which tumbled 42 percent Thursday and are down more than 94 percent for the year _ fell another 69 cents, or 16 percent, to $3.53 in afternoon trading Friday.
Worries about imperiled balance sheets hit other financial stocks. American International Group Inc. fell $4.58, or 26 percent, to $12.97, making it by far the biggest decliner among the 30 stocks that make up the Dow Jones industrial average. Merrill Lynch & Co. fell $1.69, or 8.7 percent, to $17.74.
Meanwhile, shares of Washington Mutual Inc. fluctuated following contradictory reports over whether JPMorgan Chase & Co. was in talks to acquire the Seattle-based bank. WaMu stock slipped 7 cents, or 2.5 percent, to $2.76.
"I think everyone talks about more shoes to drop and of course there have been a couple of those this week with Fannie and Freddie and Lehman. Hopefully it means we'll be getting closer to the end," said Russell Croft of Croft Value Fund, referring to government bailouts of mortgage lenders Fannie Mae and Freddie Mac and Lehman's sell-off and attempts to stay afloat.
In late afternoon trading, the Dow rose 1.14, or 0.01 percent, to 11,434.85 after falling more than 150 points in the early going.
Broader stock indicators came well off their lows. The Standard & Poor's 500 index rose 4.23, or 0.34 percent, to 1,253.28, and the Nasdaq composite index rose 6.45, or 0.29 percent, 2,264.67. The major indexes each rose more than 1 percent Thursday so some pullback likely wasn't a surprise to traders.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.73 percent from 3.64 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 5 cents to $100.92 on the New York Mercantile Exchange after briefly crossing below the $100 mark for the first time in five months. Investors tracked Hurricane Ike, which churned across the Gulf of Mexico toward the Texas coast and refining and drilling operations in the region.
The Commerce Department's report Friday that retail sales fell by 0.3 percent in August unnerved some investors who expected that a decline in gas prices from their mid-July high would leave more money in consumers' wallets.
Investors turned cautious on retailers and other companies that rely on discretionary spending. Sluggishness in buying is an unnerving prospect for Wall Street because consumer spending accounts for more than two-thirds of U.S. economic activity. Macy's Inc. fell $1.18, or 5.4 percent, to $20.67, while Best Buy Co. fell $1.61, or 3.5 percent, to $44.39.
Not all news was unwelcome Friday. Another government report showing a bigger-than-expected drop in wholesale inflation _ the steepest decline in nearly two years _ at least eased some worries about pricing pressure. And a Reuters/University of Michigan survey on sentiment showed consumers are more upbeat than they were earlier in the summer when energy prices were higher.
But the upbeat news couldn't offset investors' worries about Lehman. Many market observers are doubtful that Lehman will remain independent. Executives have been working to find someone willing to buy all or part of the company, bankers and industry executives close to the situation told The Associated Press.
Bank of America Corp., Japan's Nomura Securities, France's BNP Paribas, Deutsche Bank AG and Britain's Barclay's PLC have been mentioned this week as potential buyers for the beleaguered investment bank.
"Hopefully over the weekend there's some merger activity. It would be great for the market to see," Croft said.
Beyond the financial sector, energy and materials names advanced, such as Dow components Exxon Mobil Corp., which rose $1.84, or 2.4 percent, to $77.39, and Alcoa Inc., which rose 89 cents, or 3.2 percent, to $28.51.
Ford Motor Co. rose 31 cents, or 6.6 percent, to $4.99, while Dow component General Motors Corp. rose 55 cents, or 4.2 percent, to $13.29. A Goldman Sachs analyst wrote to in a note to clients that "it is more likely than not" that a loan program for automakers could receive at least partial funding before Congress adjourns this fall.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 1.00 billion shares.
The Russell 2000 index of smaller companies rose 0.24 or 0.03 percent, to 719.24.
Overseas, Japan's Nikkei stock average rose 0.93 percent. Britain's FTSE 100 rose 1.85 percent, Germany's DAX index added 0.91 percent, and France's CAC-40 climbed 1.97 percent.
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