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Thursday's Financial Winners & Losers

Rumors began swirling around Lehman Brothers (LEH) as options trades sent the stock down for the fourth day in a row Thursday and pulled the financial sector down along with it.

Options traders increased their bearish bets on the investment bank when puts, which give the right to sell Lehman shares, exceeded calls by almost 4 to 1. A similar scenario preceded the collapse of Bear Stearns (BSC) earlier this month. The level of put trades makes investors nervous and rumors erupted as shareholders worried about the viability of the company. Lehman shares closed down 8.9% to $38.71.

Adding to the concerns over the investment banks Oppenheimer analyst Meredith Whitney's gloomy first quarter forecasts for Merrill Lynch (MER) and UBS (UBS). The analyst expects that Merrill may report a loss of $3 a share and write down $6 billion in assets. Analysts at Sanford Bernstein and Punk Ziegel also were calling for a losing quarter at Merrill. Merrill saw its shares drop 5.7% to $41.90.

Zurich-based UBS is now projected to lose $2.75 per share on additional writedowns of $11 billion, according to the analyst. That stock managed just a 3-cent drop to $29.13, although its lost 50% of its value over the last year.

Elsewhere, PHH Corp. (PHH), which operates a mortgage lending unit, said on Thursday that it will offer $150 million in senior notes due 2012. Proceeds from the offering will be used to reduce debt and hedges intended to offset the future conversion of the notes. Investors were not happy with the news and sent the shares down 10.3% to $17.

Student lender First Marblehead's (FMD) stock tumbled after a ratings agency questioned the strength of TERI, an organization that helps protect against losses on bonds the company helps to sell. A Friedman Billings Ramsey analyst has argued since last year TERI does not have the cash to cover the losses it is on the hook for and suggested that First Marblehead will probably have to find a new source of cash. He cut his price target to $6.50 from $10. The stock lost 37 cents to $8.01.

Meanwhile banks were getting some positive traction off of several government reports, including consumer spending and unemployment, that were slightly better than expected. Fewer people signed up for unemployment than had been expected and consumers kept spending at a 2.3% pace in the fourth quarter -- better than expected, but slowing from the third quarter. National City Corp (NCC) climbed up 1.8% to $11.65 and PNC Financial Services (PNC) advanced 1.9% to $67.78.

MF Global (MF) also got some good news when it announced it had amended a clearing agreement with its former parent Man Group, freeing up $800 million in much needed capital. In the original agreement, MF Global had committed to providing clearing services for 90% of listed derivatives transactions for certain Man Investment funds. Shares shot up 2.9% to $10.01

And finally, American Express (AXP) agreed to acquire the corporate payment services division of GE Money, a division of General Electric (GE), for $1.1 billion cash. American Express initially rose 25 cents in early trading, but was having a hard time holding onto those gains as the stock whipped back and forth all day. It closed down 53 cents to $44.83.

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