Financial-Sector Woes Put Stocks on the Retreat

Updated from 1:18 p.m. EDT

Stocks on Wall Street were falling Tuesday, giving back the previous day's big gains as anxious traders dealt a substantial blow to Lehman Brothers (LEH Quote) shares.

The Dow Jones Industrial Average was recently down 128 points to 11,382, and the S&P 500 dropped 25 points to 1,243. The Nasdaq fell 30 points to 2,240.

Before trading got underway, Dow Jones Newswires reported that South Korea Development Bank, which had been rumored ready to buy a stake in Lehman, had ended talks with the struggling brokerage. A later Bloomberg report cast doubt on the early news, but both news outlets are now reporting that talks between Lehman and KDB did in fact end.

As Lehman explores its options, shares of the company are trading down some 40%.

"The financials are weak," said Ted Weisberg, floor trader at Seaport Securities. "I don't know if there's any specific news; I only know what I read in the paper." He said that much of the headline news concerning Lehman is conjecture and talk.

"There continues to be no tolerance for negative rhetoric, no matter what the source," said Weisberg. "Nothing seems to work, and whatever happens seems to have a 24-hour life cycle at best, and [then] we're back to the underlying trend, which seems to be neutral at best."

"See if they have another working weekend at Treasury this weekend," said Dirk Van Dijk, director of research at Zacks Equity Research. "This doesn't look like a pretty situation with Lehman or WaMu (WM Quote) or Downey Savings and Loan (DSL Quote)."