Of the Herald Tribune:
NEW YORK: Oil prices fell sharply Friday in their biggest one-day slide since 2004, helping lift stocks that rallied early in the day on hopes that the battered U.S. investment bank Lehman Brothers would gain a major investor.
The possible bailout of Lehman, viewed as one of the Wall Street firms most exposed to the housing debt crisis, restored some of the confidence Wall Street has lost as banks struggle to raise funds.
Shares of big manufacturers, including United Technologies, along with airlines and consumer-oriented companies also benefited from oil's slide, which curbed inflation concerns and led U.S. and euro-zone government debt prices lower.
Remarks by the U.S. Federal Reserve chairman, Ben Bernanke, who suggested that U.S. interest rates would stay on hold, also cut into the safe-haven appeal of bonds.
The dollar drifted back from its highs on Bernanke's comments because some currency traders had been anticipating U.S. yields would outpace rates in other countries.
Prospects of a Lehman white knight added to upbeat investor sentiment that was helped by soothing remarks from the influential U.S. investor Warren Buffett. Investors turned to the higher risk of equities and away from the relative safety of debt.
Lehman, whose shares have lost nearly 80 percent of their value this year, has taken $7 billion in write-downs and several brokerage firms forecast more in the past week.
"A potential willing suitor for a company that recently has been all about headline risk is providing solid footing for the sector," said John Augustine, chief investment strategist at Fifth Third Private Bank in Cincinnati.
"We're getting more constructive on the stock market, and we would say the next big move up for financials would be when you have more willing merger-and-acquisition activity," he added.
Lehman shares jumped more than 12 percent after the Korea Development Bank said it was an acquisition target. Lehman later pared gains to close up 5 percent at $14.41.
The Dow Jones industrial average rose 197.85 points, or 1.73 percent, to close at 11,628.06. The Standard & Poor's 500 index added 14.48 points, or 1.13 percent, to 1,292.20. The Nasdaq Composite index gained 34.33 points, or 1.44 percent, to 2,414.71.
European shares ended sharply higher, lifted by a rebound in financial stocks on the prospect Lehman might be bought and easing oil prices.
Buffett helped equities by saying that stocks looked more attractive now than they did a year ago.
"Let's hope he is right. Most of us think he is. The bulls would agree on his comments about valuations," said Mike Lenhoff, chief strategist at Brewin Dolphin.
The pan-European FTSEurofirst 300 index ended up 1.8 percent at 1,175.79, but was off 1.2 percent on the week.
The drop in oil prices added to a more than 20 percent fall in prices since mid-July and could increase the chance that OPEC will cut official production limits when the group meets in Vienna on Sept. 9.
U.S. crude fell $6.59, or 5.4 percent, to settle at $114.59 a barrel - the biggest fall in percentage terms since December 2004. London Brent crude fell $6.24 to $113.92 a barrel.
U.S. gold futures ended lower as a strong dollar and falling oil prices prompted investors to sell commodities across the board.
December gold futures settled down $5.50 at $833.50 an ounce in New York.
Bernanke, speaking at a Fed symposium in Jackson Hole, Wyoming, said a stable currency and a decline in commodity prices should help slow inflation this year and next.
The dollar also gained on comments by Buffett, who said in an interview that he has no bets against the dollar, which further bolstered sentiment on the U.S. currency.
The dollar rose against major currencies, with the U.S. Dollar index up 1.01 percent at 76.808. Against the yen, the dollar gained 1.56 percent at ¥110.04.
The euro fell 0.89 percent at $1.4773.
The benchmark 10-year U.S. Treasury note fell 12/32 to yield 3.87 percent. The 30-year U.S. Treasury bond fell 2/32 to yield 4.47 percent.
Asian stocks fell overnight to a two-year low, down for a fourth straight week, after oil's surge on Thursday sparked inflation worries and the financial crisis simmered unabated.
The Nikkei share average in Japan fell 0.7 percent to 12,666.04, and MSCI's pan-Asia stocks index fell 0.8 percent, touching a two-year low. The Asia-Pacific index, excluding Japan, slipped 0.03 percent.
By Maria L. de Castro
web@costaluzlawyers.es
www.costaluzlawyers.es