Stocks Open Higher After Lehman Announces Plan
Stock prices rose early Wednesday, staging a partial rebound from a steep sell-off after investors grew encouraged that Lehman Brothers Holdings Inc. is close to a deal to sell a majority stake in its investment management business and bring in much-needed capital.
Unease about the No. 4 U.S. securities firm touched off heavy selling Tuesday as investors worried that it had few options to raise capital. The already beaten down stock lost nearly half its value Tuesday as investors grew fearful that the company would succumb to soured mortgage debt and other financial difficulties. But the company's comments Wednesday that it is nearing an agreement for its investment arm eased some of Wall Street's worries.
Lehman shares rose 66 cents, or 8.5 percent, to $8.45 after tumbling 45 percent Tuesday.
Wall Street has had intractable worries about the financial sector since the near-collapse and subsequent sale of Bear Stearns Cos. in March. Banks such as Lehman have struggled in the past year with unwieldy amounts of mortgage-backed securities and other risky investments on their books that have plunged in value.
Many Wall Street observers say the stock market will not be able to carve out a sustained recovery until investors can determine the scale of losses in the financial sector. Already global banks have written off more than $300 billion in bad investments.
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