Financials hit as Lehman reported to be wooing buyers

Canadian and American stock markets began the day in the red, then built momentum to finish ahead on Thursday even as fears of continued credit problems in the United States multiplied.

U.S. financial stocks were hit, withtwo heavyweights posting double-digit declines.

The dropscameamidinvestor unease about U.S. investment bank Lehman Brothers' recovery plan and speculation about whether oil prices could soon move below $100 a barrel.

Lehman's sharesfinished down42 per cent to $4.22 US on the New York Stock Exchange, after it announced on Wednesday that it will sell a majority stake in its investment-managementarm and spin off its commercial real estate operations to shareholders to mitigate $7 billion US in losses on commercial and residential real estate. Just last week, Lehman was trading as high as $17.53 US a share.

Itemerged Thursday thatLehman Brothers has approached other major financial institutions about a potential acquisition or investment.

Bankers and executives at other financial companiessaid Lehman has been casting a wide net to find a potential buyer for all or part of the company. The bankers and executives have asked not be named, whilea spokesman for Lehman declined to comment.

Bank of America Corp., France's BNP Paribas, Deutsche Bank AG and Britain's Barclay's Plc have been mentioned this week as potential buyers of Lehman.

The woes of the fourth-biggest U.S. investment bank pulledat least one other firmdown. Merrill Lynch & Co. fell $3.87, or 17 per cent, to $19.43 US.

Toronto's S&P/TSX, coming off a week of nosediving valuations in which it lost 1,500 points, closedup116points to 12,613 after gaining 350 on Wednesday.

Falling prices for crude oil are seen as a major factor in driving down Canada's principal stock market, which is heavily weighted to oil, gas and commodity companies.

The TSX energy sub-indexgained 1.4 per cent Thursday after falling in the morning. The October futures contract for light, sweet crudefell $1.71 to $100.87 USa barrel on the Nymex, having touched as low as $100.10 a barrel.