Stock Futures Weaken After Lehman News

Treasury prices are falling, and the dollar is stronger.
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Updated from 6:49 a.m. EDT

Premarket futures in the U.S. weakened Wednesday after

Lehman Brothers

(LEH)

said it would post a nearly $4 billion quarterly loss and a potential overseas investor indicated it would steer clear of the struggling investment bank.

Futures for the

S&P 500

were down half a point at 1226 and were 1.5 points above fair value.

Nasdaq

futures were better by 8 points at 1736 and were 14 points ahead of fair value.

Though those quotes were suggesting a slightly higher open, futures had been much stronger earlier in the morning before Lehman offered details about its situation. Investor jitters about the financial sector, particularly Lehman, battered the major indices on Tuesday.

Ahead of the new session, Lehman said it would 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 were falling nearly 5% in the premarket.

Elsewhere, Standard & Poor's said it would remove

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

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.

Outside the financials, shipping firm

FedEx

(FDX) - Get Report

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

Switching to commodities, crude oil was up 29 cents to $103.55 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 $13.90 to $778.10.

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 14/32 to yield 3.62%, and the 30-year lost 14/32, yielding 4.2%. 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.