Lehman’s fate hangs over markets

Stocks finished another volatile session narrowly mixed Friday as gains in the energy, utility and raw-material sectors offset some of Wall Street’s angst over the fate of Lehman Bros. Holdings.

The three major stock indexes all managed to end the week higher.

The troubles of the financial sector dominated trading as investors tried to glean insights into Lehman’s race to sell itself or otherwise regain Wall Street’s confidence. The company’s shares spiraled lower this week, heaping pressure on executives at the No. 4 Wall Street investment bank to line up a buyer or a source of fresh capital.

Lehman shares, which tumbled 42% on Thursday, fell 57 cents, or 14%, to $3.65 on Friday. They are down 94% this year.

The market is anticipating that Lehman will arrive at a deal over the weekend, but that won’t be an antidote for the turbulent market, said Ryan Larson, senior equity trader at Voyageur Asset Management.

“Once this deal gets done,” he said, “you’ll see sentiment shift to: Who’s next?”

An unexpected 0.3% decline in retail sales last month weighed on the stock market Friday, particularly on shares of retailers and other consumer discretionary stocks.

The Dow Jones industrials fell 11.72 points, or 0.1%, to 11,421.99, after being down more than 150 points in the early going.

Broader stock indicators also came well off their lows. The Standard & Poor’s 500 index rose 2.65 points, or 0.2%, to 1,251.70, and the Nasdaq composite index rose 3.05 points, or 0.1%, to 2,261.27.

The Russell 2,000 index of smaller companies rose 1.26 points, or 0.2%, to 720.26.

Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange.

For the week, the Dow finished up 1.8%, the S&P; rose 0.7% and the Nasdaq climbed 0.2%.

Yields on government bonds rose Friday. The benchmark 10-year Treasury note climbed to 3.72% from 3.64% late Thursday. The dollar was down against the euro and the British pound, and up against the Japanese yen. Gold prices rebounded.

Oil futures rose 31 cents to $101.18 a barrel on the New York Mercantile Exchange after briefly crossing below the $100 mark for the first time in five months. Investors tracked Hurricane Ike, which churned across the Gulf of Mexico toward refining and drilling operations in Texas.

Worries about risky debt hit some other financial stocks.

American International Group tumbled $5.41, or 30%, to $12.14, making it by far the biggest decliner among the 30 stocks that make up the Dow Jones industrial average.

Merrill Lynch fell $2.38, or 12.3%, to $17.05, while Washington Mutual slipped 10 cents, or 3.5%, to $2.73.

After the Commerce Department’s report on retail sales, investors turned cautious on retailers and other companies that rely on discretionary spending. Macy’s dropped $1.04, or 4.8%, to $20.81, while Best Buy declined $1.51, or 3.3%, to $44.49.

Not all the economic news was unwelcome Friday. A government report showing a bigger-than-expected drop in wholesale inflation -- the steepest decline in nearly two years -- eased inflation worries. And a new Reuters/University of Michigan survey on sentiment indicates consumers are more upbeat than they were earlier in the summer when gas prices were higher.

In other market highlights:

* Energy and raw-material names advanced. Exxon Mobil rose $1.94, or 2.6%, to $77.50. Alcoa climbed $1.05, or 3.8%, to $28.67.

* Ford Motor gained 23 cents, or 4.9%, to $4.91, while General Motors rose 26 cents, or 2%, to $13.01. A Goldman Sachs analyst wrote in a note to clients that it was “more likely than not” that a loan program for automakers would receive at least partial funding before Congress adjourned this fall.

* Overseas, key stock indexes rose 0.9% in Japan, 1.9% in Britain, 0.9% in Germany and 2% in France.