Updated from 12:22 p.m. EDT

Stocks in New York shook off early losses and headed higher Thursday afternoon, overcoming another day of weakness in the financial-services sector.

Recently, the

Dow Jones Industrial Average

was tacking on 57 points at 11,326, and the

S&P 500

was up 8 points at 1240. The

Nasdaq

was gaining 14 points to 2244. The Dow was more than 200 points above its session low.

Wall Street went positive despite new selling in the financials. The Amex Securities Broker/Dealer index was off 0.7%, and the NYSE Financial Sector index was losing 0.8%. The KBW Bank index was slightly weaker.

Sellers were having their way with shares of

Lehman Brothers

(LEH)

and

Washington Mutual

(WM) - Get Report

, both of which continued to suffer on liquidity fears after taking heavy losses during Wednesday's trading.

The Wall Street Journal

reported that Lehman CEO Dick Fuld over the past week has been calling other financial firms to ensure they were still trading with his company. Fuld lately has been fighting rumors that Lehman will follow

Bear Stearns

,

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

as the next victim of the credit crisis, the report said.

Analysts expressed extreme skittishness about the prospects for

Lehman

. Citigroup, Goldman Sachs and Oppenheimer all cut their ratings on the brokerage. Merrill Lynch replaced its neutral rating with "no opinion." Ratings agency Moody's said after the close Wednesday that Lehman will face a credit downgrade unless it partners with a stronger company. Lehman credit default swaps also rose sharply Wednesday.

CNBC

reported Thursday that Lehman CEO Dick Fuld is attempting to sell the entire company in the wake of apparent dissatisfaction with his plan to raise capital levels. Lehman shares were recently down 41%.

Meanwhile,

Washington Mutual

dropped 19% after

Reuters

reported that action in its credit default swaps reflected increasing fears about its capital levels. A

Bloomberg

report also indicated that new accounting rules may hurt the company's chances of finding a buyer. WaMu pared earlier losses and was lately down 10%.

Merrill Lynch

(MER)

shares were slipping 15% in sympathy with Lehman and WaMu.

Separately, Fannie Mae, which along with Freddie Mac was nationalized by the government over the weekend, successfully issued $7 billion in two-year bonds as investors regained confidence in the mortgage company's credit.

In the energy space,

Petrobras

(PBR) - Get Report

said one of its fields contains between 3 billion and 4 billion barrels of oil.

Mining equipment manufacturer

Joy Global

(JOYG)

announced a $1 billion share buyback early Thursday.

As for commodities, crude oil was down 97 cents at $101.61 a barrel. Gold lost $14.90 to $747.60.

Moving on to economic data, unemployment claims for the week ended September 6 fell to 445,000 from 451,000 the week before, according to a report by the Labor Department.

The Bureau of Labor Statistics' trade balance reading for July showed an increase in the trade deficit to $62.2 billion from $58.8 billion in June. Economists had expected a $58 billion deficit. A bit later in the day, the Treasury will release its monthly budget information.

Longer-term U.S. Treasury securities were rising in price. The 10-year was gaining 8/32 to yield 3.6%, and the 30-year was up 14/32 to yield 4.2%. The dollar was rising vs. the euro and pound, but falling against the yen.

Foreign exchanges were broadly losing value. The FTSE in London and the Dax in Frankfurt were both trading lower. Hong Kong's Hang Seng and Japan's Nikkei finished their day with losses.