* Hopes of an investment in Lehman buoys financials
* Buffett says stocks more attractive now than a year ago
* Bernanke encouraged by drop in commodity prices
* Dow up 1.2 pct, S&P 500 up 0.6 pct, Nasdaq up 0.8 pct
(Updates to midday)
By Ellis Mnyandu
NEW YORK, Aug 22 (Reuters) - U.S. stocks advanced on
Friday on hopes that Lehman Brothers Holdings Inc <LEH.N>, the
fourth-largest U.S. investment bank, might attract a major
investor, fueling gains in the battered financial sector.
A drop in oil prices also buoyed sentiment, with shares of
big manufacturers, including United Technologies <UTX.N>,
airlines and consumer-oriented companies among the
beneficiaries.
The shares of Lehman jumped 10 percent after the Korea
Development Bank [] said the U.S. investment bank was
one of its options for an acquisition. For details, see
[]
Lehman is among the U.S. banks whose business has been
battered by mounting losses stemming from the U.S. housing
slump. Earlier this week, several brokerages forecast more
write-downs at Lehman on top of the $7 billion that the bank
has already taken.
"The fact that someone is willing to take a big stake in
Lehman, the market is interpreting that as things aren't as
bad as they may be. There must be value there for the stock,"
said Giri Cherukuri, head trader at OakBrook Investments LLC,
in Lisle, Illinois. Of course, come "tomorrow, it could be
another story."
The Dow Jones industrial average <> jumped 172.45
points, or 1.51 percent, to 11,602.66. The Standard & Poor's
500 Index <.SPX> gained 10.26 points, or 0.80 percent, to
1,287.98. The Nasdaq Composite Index <> added 23.72
points, or 1.00 percent, to 2,404.10.
The market also got a boost from investor Warren Buffett's
comments in a television interview that he has no bets against
the U.S. dollar and stocks are more attractive now than a year
ago.
In another high-profile appearance, Federal Reserve
Chairman Ben Bernanke said the recent decline in commodity
prices and stabilization of the U.S. dollar were encouraging.
Investors pushed stocks higher after the Fed chairman said
the central bank's current low interest-rate strategy was
conditioned on oil and commodity prices stabilizing as the
global economy slows and that the trend appeared to be
happening. []. Bernanke spoke at an annual Fed
symposium in Jackson Hole, Wyoming, attended by central
bankers from around the world.
Shares of technology bellwethers, including Apple Inc
<AAPL.O>, also advanced.
Lehman shares surged $1.38, or 10.1 percent, to $15.10 on
the New York Stock Exchange.
Shares of the No. 3 U.S. bank JPMorgan Chase <JPM.N>
gained 4 percent to $37.71, ranking among the major advancers
in both the S&P 500 and the Dow. The S&P financial index
<.GSPF> climbed 2 percent.
In an interview on CNBC television, Buffett also said he
expects the U.S. government to take action to support troubled
home financiers Fannie Mae <FNM.N> and Freddie Mac <FRE.N> .
With lower oil prices expected to lead to lower energy
costs for businesses and consumers, investors also snapped up
shares of big manufacturers, technology and retail companies.
Shares of plane maker and U.S. defense contractor Boeing
<BA.N> added 2.3 percent to $65.04, while Caterpillar <CAT.N>,
a maker of bulldozers and excavators, gained 1.9 percent to
$69.99.
Shares of Wal-Mart Stores <WMT.N>, the world's biggest
retailer, rose 1.1 percent to $59.15 as front-month U.S. crude
dropped $3.18 to $118.00 a barrel. A recovery in the dollar
contributed to the drop in oil prices.
Among airlines, shares of Delta Air Lines <DAL.N> climbed
5.1 percent to $8.30, while the airline index <.XAL> shot up
4.9 percent.
On Nasdaq, shares of iPod and iPhone maker Apple <AAPL.O>
gained 1.7 percent to $177.21.
(Editing by Jan Paschal)
