Stocks declined Friday amid uncertainty surrounding Lehman Brothers and as the government's reading on retail sales missed its mark.
The Dow Jones Industrial Average opened down about 60 points, then doubled that slide, before paring back to the 60-point drop. Two-thirds of the Dow 30 stocks were lower. (Track the Dow winners & losers.)
Retail sales fell 0.3 percent, when economists had expected a 0.2-percent rise amid a drop in gasoline prices and weak consumer spending. Excluding autos, sales were off 0.7 percent, lower than the 0.2-percent drop expected.
In other economic news: Producer prices fell 0.9 percentin August, nearly double the 0.5-percent decline expected, but core prices rose 0.2 percent, as expected. Consumer sentiment hit an eight-month highin a mid-August reading, blowing past expectations, amid relief over lower gasoline prices. Business inventories increased by 1.1 percent in July, the highest in more than four years and more than double of what was expected, as auto inventories ballooned.
Also weighing on the market was crude oil's climb toward $102 a barrel as Hurricane Ike barreled toward the Texas Gulf Coast.
Financials were the primary source of discontent.
"Bear Stearns was supposed to end it. … Now they’re talking about Lehman," Art Cashin, director of floor operations at UBS Financial, told CNBC. "With no deal when the Asian markets opened, people think the negotiations are going to be pushed into the weekend to give them a couple of more hours to look at things. And already, they’re looking for the next rumor-monger victim behind Lehman."
"The frustration is palpable," Cashin said. The real problem is that "everybody’s got to be very careful with their words. Because, even if somebody’s in reasonably good condition, you can cause a run on a bank … This is a very dangerous business," Cashin said.
The market breathed a sigh of disappointment as 6 a.m. ET came and went with nary an announcement from Lehman Brothers.
Lehman Brothers shares dropped 10 percent at the open, after gaining as much as 25 percent premarket amid hopes of a buyout.
The investment bank is still actively working toward finding a buyer, with several big names being bandied about including Barclays, Bank of America and HSBC. Company officials are trying to get a deal wrapped up and announced by Sunday night, people close to the deal tell CNBC.