Stocks Can't Shake Financial Worries

Updated from 4:18 p.m. EDT

New York's major averages closed lower Tuesday after Federal Reserve chairman Ben Bernanke voiced disquiet on the sorry state of the U.S. dollar and investors appeared increasingly spooked by negative chatter about Lehman Brothers (LEH Quote).

The Dow Jones Industrial Average bobbed in and out of the green earlier before reversing course sharply to sink 100.97 points, or 0.81%, to 12,402.85, though the index finished well off its low for the day. Broader indices had held their own for most of the session, but in the end the S&P 500 surrendered 8.02 points, or 0.58%, to 1377.65, as the Nasdaq Composite lost 11.05 points, or 0.44%, to 2480.48.

"Investors have been trying to question whether the economy is really going to recover as strongly as the market had predicted, and that stocks had likely run a little too far, too fast," said Chip Hanlon, president of Delta Global Advisors and contributor to RealMoney.com, a sister site to TheStreet.com. The S&P and, in particular, the Nasdaq, gained substantial ground in May.

Among the day's big news items was a Wall Street Journal report that Lehman Brothers (LEH Quote) may attempt to raise between $3 billion and $4 billion in order to shore up its frail balance sheet, serving as yet another reminder that the credit crunch continues to simmer despite being mostly out of the spotlight in recent weeks. The paper said Lehman will probably announce this, together with its quarterly results, later this month.

Rumors were also circulating that Lehman has been forced to borrow at the Fed's discount window, but CNBC reported that the brokerage has not accessed that facility since April 16, according to Lehman's treasurer. Nevertheless, the stock plunged 9.5% to finish at $30.61.