S&P GLBL CLN ENGY : Wall Street extends losses as S&P warns on Lehman

NEW YORK (Reuters) - Stocks extended their sharp losses on Tuesday and the S&P 500 fell more than 2 percent after Standard & Poor's said it may cut credit ratings of Lehman Brothers Holdings.

S&P put Lehman's rating on watch negative. Shares of Lehman, the fourth largest U.S. investment bank, fell more than 38 percent to $8.69.

Lehman's shares were on track for their biggest daily percentage decline ever after earlier news that talks about a possible investment from Korea Development Bank had broken down.

Worries over Lehman, which needs capital to offset losses tied to mortgage investments, caused a broad spell-off in financial companies.

Falling oil prices, meanwhile, weighed down shares of energy companies. Crude oil fell $2.14 to $104.13 a barrel after earlier hitting a five-month low.

The Dow Jones industrial average <.DJI> was down 133.45 points, or 1.16 percent, at 11,377.29. The Standard & Poor's 500 Index <.SPX> was down 24.09 points, or 1.90 percent, at 1,243.70. The Nasdaq Composite Index <.IXIC> was down 31.53 points, or 1.39 percent, at 2,238.23.

(Additional reporting by Ellis Mnyandu; editing by Leslie Adler)