NEW YORK (Reuters) - Stocks closed little changed on Friday in day of whipsaw moves as uncertainty over the fate of troubled investment bank Lehman Brothers LEH.N kept investors anxious about the health of the U.S. financial system.
But shares of natural resource companies and utilities gained as commodity prices rose, offsetting losses among financial and bank shares.
All three major indexes managed to finish the week higher.
Concerns about American International Group’s (AIG.N) large exposure to mortgages pushed the insurance company’s shares down more than 30 percent on Friday, making it the top drag on the Dow and S&P.
Lehman shares tumbled to a 14-year low amid uncertainty about what form a possible deal to rescue the firm would take, especially after a source said the Treasury was reluctant to provide financial backing in any deal.
“Lehman is a proxy for the U.S. markets to some extent,” said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray in Minneapolis. “Where Lehman goes so will the market in the short term.”
A 5 percent slide in General Electric (GE.N) shares added to the negative tone as investors feared the impact of ongoing financial sector turmoil on the conglomerate, which has a finance arm and commercial real estate interests. GE shares were a top drag on the Dow, falling to $26.75.
The Dow Jones industrial average .DJI was down 11.72 points, or 0.10 percent, at 11,421.99. The Standard & Poor's 500 Index .SPX was up 2.67 points, or 0.21 percent, at 1,251.72. The Nasdaq Composite Index .IXIC was up 3.05 points, or 0.14 percent, at 2,261.27.
For the week, the Dow finished 1.8 percent higher while the S&P added 0.8 percent and the Nasdaq edged up 0.2 percent.
The S&P index of financial shares .GSPF fell 1.1 percent, while shares of AIG (AIG.N) shed 30.8 percent to $12.14 on fears of more mortgage-related losses.
Lehman shares fell 13.5 percent to $3.65 after falling as low as $3.17 earlier.
Sources with direct knowledge of the talks said U.S. authorities were in intensive discussions with Lehman on options including an outright sale.
But a source familiar with U.S. Treasury Secretary Henry Paulson’s thinking said he is “adamant” no government money be used in any deal to resolve that crisis.
Any deal to save Lehman would come less than a week after a government bailout of Fannie Mae FNM.N and Freddie Mac FRE.N, the biggest providers of U.S. home financing. Bank of America (BAC.N), the No. 2 U.S. bank, has been mentioned as a possible suitor.
“This is as risky and as dicey a time as I’ve ever seen,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York.
Investors warned that a resolution for Lehman would not ease the credit crisis.
“We’re not even close to being out of the woods yet,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. “But these are constructive, necessary steps. Resolving these issues, is part of the process.”
Washington Mutual (WM.N), under pressure of late on capital concerns, fell 3.5 percent to $2.73, reversing a short-lived gain after the American Banker reported that JPMorgan Chase was in advanced talks to buy the savings and loan.
The energy sector was a bright spot for an otherwise strained market. U.S. crude oil fluctuated, briefly dipping below $100 a barrel before settling 31 cents higher at $101.18.
Fears about Hurricane Ike and the damage it could do to U.S. oil facilities in the Gulf of Mexico remained a factor.
An index on energy stocks .GSPE was up 2.8 percent, and shares of Exxon Mobil (XOM.N) rose 2.6 percent at $77.50.
Shares of utilities also gained, with an index .GSPU up 1.4 percent.
On the economic front, the latest data on consumers was mixed. A government report showed retail sales unexpectedly fell in August, adding to concerns about the impact of the housing slump and a faltering labor market on household spending.
That weighed on shares of iPod maker Apple Inc (AAPL.O), which fell 2.4 percent to $148.94 and was a top drag on the Nasdaq.
But U.S. consumer confidence soared unexpectedly to an eight-month high in September as lower fuel prices soothed inflation fears and made Americans more hopeful about the economy, the Reuters/University of Michigan Surveys of Consumers showed.
About 1.31 billion shares changed hands on the New York Stock Exchange on Thursday, below last year’s estimated daily average of roughly 1.90 billion. On Nasdaq, about 1.99 billion shares traded, below last year’s daily average of 2.17 billion.
Advancing stocks outnumbered declining ones by about 1.3 to 1 on the NYSE, while on the Nasdaq, decliners edged advancers by about 1.2 to 1.
Additional reporting by Richard Leong and Ellis Mnyandu; Editing by Leslie Adler