It was another whipsaw session on the Street as stocks staged a late-day rally to pare early losses and finish deep in the green. The Dow climbed 165 points to close at 11,434.

The big surge came in response to word that Lehman Brothers, Inc. (LEH), the beleaguered investment bank, had entered into conversations with possible suitors after Moody's Investors Services said the company needs to find a "stronger financial partner." Lehman has been aggressively pursuing additional capital support as the company suffers from a portfolio of deteriorating assets and mounting losses.

Adding to the gloomy macro-level economic picture was the Commerce Department's report that the national trade deficit grew to its highest level in 16 months in July, climbing 5.7% to $62.2 billion. The reading was worse than analyst projections of $58 billion, driving the deficit between imports and exports to its highest level since March

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