Stocks moved higher Wednesday after Lehman Brothers (LEH) made a series of surprise announcements designed to bolster investor confidence one day after the investment bank's troubles triggered a broad stock market sell-off.
On Tuesday, an investment deal with a South Korean bank appeared to fall apart, causing the investment bank's shares to plunge 45%. That prompted Lehman Brothers to release earnings a week early and announce measures to keep the firm afloat.
Lehman Brothers posted a preliminary loss of $3.9 billion in the third quarter. Losses on bad investments totaled a net $5.6 billion. Investors worried Lehman needs capital to stay afloat.
The firm will slash its annual dividend to 5 cents and it will spin off to shareholders Lehman's $25 billion to $30 billion commercial real estate portfolio. The firm plans to sell a majority interest in its investment management division, as well. Executives say they are committed to exploring all strategic options, which could include a sale of the company.
While the broader market reacted positively to the news, Lehman shares ended the day down almost 7% to 7.93.
On Wednesday, the Dow Jones industrial average was up 38.19 points, or 0.34%, to 11,268.92. The broader S&P 500 index gained 7.53 points, or 0.61%, to 1,232.04. And the tech-heavy Nasdaq composite index was up 18.89 points, or 0.85%, to 2,228.70.
On the New York Stock Exchange, 17 stocks moved higher for every 4 lower in price. On the Nasdaq, the ratio was 16 to 12 positive.
Oil prices were narrowly lower Wednesday. On the NYMEX, October crude oil fell 26 cents to $103 per barrel.
Among other stocks in the news, FedEx Corp. (FDX) expects earnings of $1.23 per share in its first quarter, up from previous guidance of 80 cents to $1 per share. However, it reaffirmed its full-year earnings guidance, saying weak economic conditions are likely to offset better-than-expected results in the first quarter.
Kraft Foods (KFT) raised its quarterly dividend 7.4% to 29 cents per share.
Imclone Systems (IMCL) says it expects an acquisition bid of $70 per share from a large pharmaceutical company. That beats Bristol-Myers Squibb's BMY $60 per share offer for the firm.
GFI Group (GFIG) says it ended discussions with Tullett Prebon plc on a possible merger of the two firms.
Major European stock indexes were lower Wednesday. In London, the FTSE 100 index fell 0.91% to 5,366.20. In Paris, the CAC 40 index lost 0.23% to 4,283.66. Germany's DAX index slipped 0.37% to 6,210.32.
Major Asian indexes also fell. Japan's Nikkei 225 index dropped 0.44% to 12,346.63. In Hong Kong, the Hang Seng index lost 2.4% to 19,999.78.
Treasury market
Treasuries were mixed Wednesday. The ten-year Treasury note rose 15/32 to 103-04/32 for a yield of 4.62%, while the 30-year bond tumbled 27/32 to 104-24/32 for a yield of 4.22%.