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While you were sleeping: BusinessWire overnight wrap

Friday 22nd August 2008

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Energy shares, bolstered by a surge in the price of oil, lifted Wall Street higher, more than offsetting concerns about higher inflation and persistent concerns about more credit losses in the US financial sector.

The Dow Jones industrial average was up 12.62 points, or 0.11%, at 11,430.05. The Standard & Poor's 500 Index was up 3.17 points, or 0.25%, at 1,277.71. The Nasdaq Composite Index was down 8.70 points, or 0.36%, at 2,380.38.

Chevron had the biggest gain in the Dow Jones Industrial Average and Exxon Mobil climbed 2% as oil surged the most in two months.

Energy shares, which led the five-year bull market in stocks that ended in October, have surged 8.1% in the past three days. The industry will post third-quarter profit growth of 53%, the most among 10 groups in the S&P 500, according to analysts' estimates compiled by Bloomberg.

US crude gained US$5.62, or 4.86%, to settle at $US121.18 a barrel, the biggest percentage gain since June 6. London Brent crude climbed US$5.80 to US$120.16.

The gains in oil capped a rebound of more than US$9 from lows earlier this week that put a dramatic end to a more than 20% slide in prices since mid-July, leaving analysts unsure if oil's next big move will be up or down.

Shares in banks and investment banks again took it on the chin.

Goldman Sachs, Morgan Stanley and Lehman would write down a combined US$6.4 billion during the third quarter, Citigroup analyst Prashant Bhatia wrote in a report.

Lehman might post a third-quarter per-share loss of US$3.25, wider than the 41-cent loss Bhatia had predicted earlier. Lehman had the most so-called hard-to-sell assets, at US$75.6 billion, followed by Goldman, at US$45.2 billion, he said. The hard-to-sell assets include commercial real estate, residential mortgages and leveraged loans.

Fannie and Freddie

Home finance giants Fannie Mae and Freddie Mac came back from earlier losses of about 20% as growing speculation of an imminent government bailout forced investors to buy back shares to exit bets on a further decline.

Oil's surge boosted stocks but further worsened sentiment toward the US dollar.

The US dollar index, a gauge of the US currency's value against six major currencies, was on track for its worst one-day fall in five months. Against the yen, the dollar was headed toward its sharpest daily loss since July.

The US Dollar Index fell 1.09% at 76.075. Against the yen, the dollar shed 1.22% at 108.45.

The euro rose 1.04% at US$1.4896.

The Reuters-Jefferies CRB Index of 19 commodity futures rose 3.7% to cap a 6.2% gain so far this week, its biggest weekly percentage rise since July 1975. December gold futures settled up US$22.70 at US$839.00 an ounce.

The yield on the two-year note rose six basis points to 2.31% at 4:08pm in New York, according to bond broker BGCantor Market Data. The price of the 2.75% security due in July 2010 fell 4/32, or $1.25 per US$1,000 face amount, to 100 26/32. Benchmark 10-year note yields rose two basis points to 3.83%.

By Jonathan Underhill

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