Dow Tumbles as Lehman Plunges

U.S. Stocks Tumble as Lehman Brothers Rattles Banking System
Sept. 9 (Bloomberg) -- U.S. stocks tumbled as a 45 percent drop in Lehman Brothers Holdings Inc. shook the banking industry, and oil's plunge to a five-month low pushed energy companies down by the most in six years.

The Standard & Poor's 500 Index slumped 3.4 percent, its biggest drop since February 2007, a day after the government's bailout of Fannie Mae and Freddie Mac sparked the biggest rally in a month. Lehman led financial shares to their steepest drop since July after talks to sell a stake to Korea Development Bank broke down. Massey Energy Co., Valero Energy Corp. and Freeport- McMoRan Copper & Gold Inc. fell at least 9 percent.

The S&P 500 decreased 43.28 points to 1,224.51. The Dow Jones Industrial Average lost 280.01 to 11,230.73. The Nasdaq Composite Index sank 59.95, or 2.6 percent, to 2,209.81. About 10 stocks dropped for each that rose on the New York Stock Exchange.

The declines pared the S&P 500's advance from a 2 1/2-year low on July 15 to 0.8 percent. Financial stocks led the rebound, rising 31 percent through yesterday on speculation they're recovering from the collapse of the subprime mortgage market. Banks, brokerages and insurance companies in the S&P 500 are still down 25 percent as a group for the year after losing 21 percent in 2007, the steepest decline in four decades.

Short-Lived Rally

The S&P 500 gained 2.1 percent yesterday, the most in a month, on speculation the government takeover of Fannie Mae and Freddie Mac will help banks recover from $507 billion in mortgage-related losses from.