(Adds Anheuser-Busch shares up after-hours on unsolicited
takeover bid, Merrill's downgrade of Lehman, updates volume)
* All three indexes fall about 2 percent as oil jumps
* Lehman falls for 4th day, off 30 percent since Thursday
* Fed's Beige Book keeps investors on edge
By Jennifer Coogan
NEW YORK, June 11 (Reuters) - U.S. stocks sank on
Wednesday, with all three indexes losing around 2 percent,
after oil prices shot back near their record high, stoking
fears about inflation and its toll on consumers.
More signs of trouble in the financial sector further
soured the mood on Wall Street. The Financial Times said on
Wednesday that Lehman Brothers <LEH.N> may look to raise more
capital, hammering shares of the investment bank. A spokesman
for Lehman declined to comment. Lehman's stock has declined
about 30 percent in four straight days of losses.
The Federal Reserve offered no comfort after its report on
regional economic conditions said higher energy and commodity
prices are being passed on to consumers in some areas, causing
inflation pressures. The report, known as the "Beige book,"
also said economic activity was generally weak.
Oil futures jumped almost $7 to an intraday high above
$138 a barrel, and settled at $136.38 a barrel.
"I think we've had our big move due to oil, (crude's)
almost completely rebounded and right near the highs," said
Ryan Detrick, senior technical strategist at Schaeffer's
Investment Research in Cincinnati. "That's brought back all
those inflation worries."
The Dow Jones industrial average <> tumbled 205.99
points, or 1.68 percent, to 12,083.77. The Standard & Poor's
500 Index <.SPX> dropped 22.95 points, or 1.69 percent, to
1,335.49. The Nasdaq Composite Index <> slid 54.93
points, or 2.24 percent, to 2,394.01.
Shares of Lehman Brothers lost 13.6 percent to $23.75, its
lowest close since October 2002. Adding to the U.S. investment
bank's woes, Merrill Lynch downgraded its rating on Lehman's
shares to "neutral" from "buy" on Wednesday -- just a week
after upgrading the stock.
Lehman rival Goldman Sachs <GS.N> declined 2.9 percent to
$162.40. Goldman has been the sole major investment bank to
avoid fallout from the subprime mortgage crisis, but traders
said on Wednesday there was talk that it may have to write off
bad loans. A Goldman Sachs spokesman said the company does not
comment on market rumors.
The S&P financial subindex <.GSPF> fell 3.3 percent to end
at 298.78 -- a 5-year low.
DELTA DIVES
Shares of energy-hungry companies, including airlines,
took a beating. Delta Air Lines <DAL.N> dropped 9.6 percent to
$5.36 on the New York Stock Exchange, while package delivery
service FedEx Corp <FDX.N> slid 4 percent to $86.57, also on
the NYSE.
Fuel worries also weighed on Nasdaq's transport
components. Shares of YRC Worldwide Inc <YRCW.O>, North
America's top trucker, tumbled 8.4 percent to $14.75 on the
Nasdaq. The stock of freight forwarder Expeditors
International <EXPD.O> lost 4.9 percent to $43.99 in Nasdaq
trading.
Shares of retailers also fell, with Wal-Mart Stores Inc
<WMT.N> down almost 2.1 percent at $58.52.
Alcoa Inc <AA.N> was the top drag on the Dow, falling 8
percent to $39.32 after JPMorgan cut its rating on the
aluminum producer's stock.
Confounding the day's downward trend was U.S. office
supplies company Staples <SPLS.O>, whose shares rose 5.3
percent to $24.38 on the Nasdaq. Staples won its battle to buy
Corporate Express <CXP.AS> after the Dutch office supplies
firm agreed to a sweetened bid of $2.65 billion.
"BUD-RISE-ER"
Shares of Anheuser-Busch <BUD.N> rose after the closing
bell following the U.S. brewer's announcement that it received
an unsolicited takeover bid from Belgian competitor InBev
<INTB.BR>, the maker of Stella Artois and Beck's.
Anheuser-Busch shares climbed 6.5 percent to $62.12 in
extended-hours trading.
During the regular session, Anheuser-Busch shares gained
$1.20, or 2.1 percent, to close at $58.35 on the NYSE. The
company's flagship brand is Budweiser beer, or simply Bud -- a
fact evoked by its NYSE stock symbol "BUD." Its TV commercials
with "talking" frogs who croaked out their names -- Bud, Weis,
Er -- became one of the most popular American TV ad campaigns
after they made their debut during the Super Bowl in the
mid-1990s.
Trading volume was modest on the New York Stock Exchange,
with about 1.39 billion shares changing hands, below last
year's estimated daily average of roughly 1.90 billion, while
on Nasdaq, about 2.12 billion shares traded, below last year's
daily average of 2.17 billion.
Declining stocks trounced advancing ones by more than 4 to 1
on the NYSE and by more than 3 to 1 on the Nasdaq.
(Reporting by Jennifer Coogan; Editing by Jan Paschal)
