Stocks Fight to Shake Negativity - TheStreet

Stocks Fight to Shake Negativity

The three major indices continue to track in the red despite some early volatility that pushed them briefly into the green.
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Updated from 12:00 p.m. EDT

Stocks on Wall Street continued to track slightly lower Wednesday as investors showed caution in a market that had displayed high volatility the day before.

The

Dow Jones Industrial Average

dropped 42 points to 11,475, and the

S&P 500

slipped 7.9 points at 1270. The

Nasdaq

was lower by 19 points at 2330.

Several financial-services names held the spotlight. Continuing to stoke speculation on a potential deal to help struggling brokerage

Lehman Brothers

(LEH)

, the

Associated Press

said that Korea Development Bank has inked a proposal to buy a 25% stake in Lehman. The news agency cited a report in a widely circulated South Korean newspaper.

Meanwhile,

Ospraie Fund

, a commodities investment fund that is 20%-owned by Lehman, announced that it will be shutting down because of bad bets on copper and natural gas.

Elsewhere in the financial sector,

The Wall Street Journal

reported that large Chinese banks are reducing their investments in mortgage debt issued by

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

.

Following the report, Fannie successfully issued $2 billion in short-term bills at an interest rate lower than a week ago, offering some reassurance to investors.

Worries for financial firms were not confined to the U.S. The Royal Bank of Scotland said that U.K. bank

Barclays

(BCS) - Get Report

may have to raise $13.3 billion in capital to attain liquidity levels on par with competitors.

Wachovia

(WB) - Get Report

named Tom McManus, former chief investment strategist at Banc of America Securities, as chief investment officer.

Back in merger news, beverage maker

Coca-Cola

(KO) - Get Report

offered to buy China Huijan Jice for about $2.5 billion.

In earnings, machinery manufacturer

Joy Global

(JOYG)

reported fiscal third-quarter earnings that beat analyst estimates and raised its 2008 forecast. Office-supplies retailer

Staples

(SPLS)

reported that second-quarter earnings dropped 16% year over year.

In the realm of commodities, crude oil was declining 93 cents to $108.78. Gold was down $3.70 at $806.80.

Shifting to economic data, employment consultancy Challenger, Gray & Christmas announced that employers announced job cuts totaling 377,325 for the summer, a 30% increase over spring layoff numbers.

The Census Bureau said factory orders for July were up 1.3% in July, vs. a 2.1% increase in June. Analysts had been looking for an increase of 0.4%.

Ford

(F) - Get Report

said that its auto sales in the U.S. dropped 26.6% in August on flagging sales of large pickups and SUVs. The company also said it would reduce production for the second half of 2008.

The

Federal Reserve's

so-called beige book, which contains anecdotal data on the state of the economy, will come out later in the afternoon.

Longer-dated U.S. Treasury securities were slightly higher in price. The 10-year was up 10/32 to yield 3.7%, and the 30-year was adding 18/32, yielding 4.32%. The dollar was gathering strength against the euro and pound, but falling vs. the yen.

Overseas exchanges were mainly trading lower. The FTSE in London, the Dax in Frankfurt and the Hang Seng in Hong Kong were showing weakness, while the Nikkei in Japan was up slightly.