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U.S. Stocks Climb on Lehman Plan

The major indices open with modest gains as investors weigh the bank's plan and other news.

Updated from 8:43 a.m. EDT

Stocks in the U.S. traded up slightly at the open Wednesday after

Lehman Brothers

(LEH)

outlined plans to bolster its capital levels as it deals with increasing losses related to the credit crisis.

The

Dow Jones Industrial Average

was gaining 79 points at 11,309, and the

S&P 500

added 9 points to 1234. The

Nasdaq

climbed 17 points to 2227.

Ahead of the session,

Lehman announced a plan

to sell a majority stake in its investment-management division and likely report a third-quarter loss of $3.9 billion. Lehman also said it plans to spin off its commercial real-estate assets into a new company and slash its annual dividend to 5 cents a share from 68 cents.

Separately, Korea Development Bank, which had been considering buying a stake in the New York firm, ended talks to purchase an interest. Shares of Lehman, which lost some 45% in Tuesday's session, were trading up 7% in early trading Wednesday.

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Elsewhere, Standard & Poor's said it would remove

Fannie Mae

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and

Freddie Mac

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from the S&P 500 index after the close of trading. The government over the weekend announced plans to seize the two mortgage giants, whose exposure to the credit and housing crises threatened the U.S. financial system.

Further indicating worries, Keefe Bruyette launched a salvo of ratings downgrades at nine banks, including

BB&T

(BBT) - Get BB&T Corporation Report

,

Bank of America

(BAC) - Get Bank of America Corp Report

and

Fifth Third

(FITB) - Get Fifth Third Bancorp Report

.

Kansas Bankers Surety

, a subsidiary of

Berkshire Hathaway

(BRKA)

, also stopped insuring bank deposits that exceed levels guaranteed by the government.

Outside the financials, shipping firm

FedEx

(FDX) - Get FedEx Corporation Report

said its fiscal first-quarter profit would exceed estimates while reaffirming its yearly earnings guidance.

The Wall Street Journal

also reported that the Pentagon canceled its air-tanker competition. The Pentagon said it couldn't decide to award a contract to

Boeing

(BA) - Get Boeing Company Report

or

Northrop Grumman

(NOC) - Get Northrop Grumman Corporation Report

and

European Aeronautic Defense Systems

, the

Journal

said.

Meanwhile, chipmaker

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

raised the low end of its earnings guidance for the third quarter.

Switching to commodities, crude oil was up 3 cents to $103.29 a barrel. OPEC announced it was reducing oil production by 520,000 barrels a day in response to what it said was an over-supplied market. Gold was losing $6.70 to $785.30.

On a day that is rather light on economic data, the Energy Information Administration's weekly read on crude-oil inventories is expected later Wednesday morning.

Longer-dated U.S. Treasury notes were falling in price. The 10-year was down 28/32 to yield 3.67%, and the 30-year lost 1-10/32, yielding 4.25%. The dollar was gathering strength vs. the euro, yen and pound.

Foreign markets such as the FTSE in London, and the Dax in Frankfurt were trading lower. The Nikkei in Japan and the Hang Seng in Hong Kong ended the trading day in Asia lower.