Fears on Lehman, financials send market into skid

* Fears of Lehman's ability to raise capital hits stocks
* Energy shares flounder as oil prices hit 5-month low
* Surprisingly weak home sales data adds to economic fears
* Dow off 2.4%; S&P 500 off 3.4%; Nasdaq off 2.6%

NEW YORK - US stocks plunged on Tuesday, driving the benchmark S&P 500 to its worst day in one and a half years, as concern about Lehman Brothers' ability to raise much-needed capital reignited fears about the broader financial sector.

Energy shares tumbled as oil prices fell more than US$3 a barrel to a five-month low, hit by news that Hurricane Ike would veer away from Gulf of Mexico production facilities.

Shares of Lehman, the No 4 US investment bank, skidded 45 per cent and renewed worries about other financial firms' ability to contend with mortgage losses. The S&P financial index fell 6.6 per cent.

Lehman's percentage slide was its biggest since it went public in 1994, and fears about its survival doused Monday's optimism on the government's bailout of home finance firms Fannie Mae and Freddie Mac in an effort to boost the slumping housing market.

The S&P 500 shed more than 3 per cent, while the Dow and Nasdaq fell more than 2 per cent each.

The Dow Jones industrial average was down 280.01 points, or 2.43 per cent, at 11,230.73. The Standard & Poor's 500 Index was down 43.28 points, or 3.41 per cent, at 1,224.51. The Nasdaq Composite Index was down 59.95 points, or 2.64 per cent, at 2,209.81.

Standard & Poor's said the market value of the S&P 500 is down US$3.1 trillion from its record closing high hit on Oct 9, 2007.

Lehman's slide began on news that talks about a possible investment into Lehman from Korea Development Bank had broken down, and it continued after Standard & Poor's rating agency said it could cut the investment bank's credit rating.

Lehman shares ended down 45 per cent at US$7.79. The slide was marked by a surge in volume, with more than 300 million shares changing hands in composite trading, the biggest volume surge since at least September 2002.

Source: Singapore Business Times - 10 Sep 2008