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While you were sleeping: BusinessWire overnight wrap

Wednesday 10th September 2008

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Wall Street plunged amid renewed fears about the impact of the credit crisis as speculation swirled that Lehman Brothers might fail to find additional capital to shore up its balance sheet.

Adding to the negative sentiment was the price of oil falling to a five-month low, hit by news that Hurricane Ike would veer away from Gulf of Mexico production facilities. Energy shares tumbled.

Shares of Lehman, the No. 4 US investment bank, skidded 45% and renewed worries about other financial firms' ability to contend with mortgage losses. The S&P financial index fell 6.6%.

The Dow Jones industrial average was down 279.11 points, or 2.42%, at 11,231.63. The Standard & Poor's 500 Index was down 43.15 points, or 3.40%, at 1,224.64. The Nasdaq Composite Index was down 59.95 points, or 2.64%, at 2,209.81.

Standard & Poor's said the market value of the S&P 500 was down US$3.1 trillion from its record closing high hit on October 9, 2007.

S&P warned it may cut Lehman's credit ratings, saying it believes the company may report a "substantial" third-quarter loss.

American International Group Inc., the largest US insurer by assets, tumbled 19% to US$18.37 for the steepest drop in the Dow.

Homebuilders in S&P indexes slumped 8.6% after an 11% rally yesterday. A gauge of signed contracts to buy previously owned homes fell more than forecast in July, an industry report today showed, as the first nationwide decline in US home prices since the 1930s discouraged buyers.

Investors also sold off shares of big manufacturers, including Caterpillar, down 5% at US$61.38. The firm is among the bellwethers whose fortunes hinge on domestic and overseas demand.

On Nasdaq, shares of iPod maker Apple Inc were a top drag, falling 4% to US$151.68. Apple Chief Executive Steve Jobs on Tuesday introduced new iPod nano and Touch music players. He also poked fun at reports of his alleged poor health, saying he's healthy but could stand to gain 10 to 15 pounds.

Yen strengthens

The yen rose against the dollar, euro and the 14 other most widely traded currencies as a drop in global stocks raised speculation that investors will reduce holdings of higher-yielding assets and pay back loans in Japan.

Japan's currency gained versus the Brazilian real and the Australian dollar as the end of talks between Lehman and Korea Development Bank, led to bets that investors reduced carry trades. The Canadian and Australian dollars also were hit by falling commodity prices.

The yen gained 1.2% to 107.02 per dollar at 4:24pm in New York, from 108.28 yesterday. It rose 1.3% to 150.99 per euro, from 152.96. The dollar traded at US$1.4108 per euro, compared with US$1.4128, after earlier touching US$1.4047, the strongest level since October 9, 2007.

Canada's dollar declined 0.5% versus its US counterpart and Australia's currency dropped as much as 1.9% to 80.05 US cents, the lowest level since August 2007, as crude oil and gold declined. Commodities account for half of Canada's exports, while raw materials make up 60% of Australia's sales overseas.

A safe-haven bid helped US bonds rise for a second day. Among long-dated maturities, benchmark 10-year Treasury notes rose 29/32 in price, their yields easing to 3.59% from a yield of 3.70% late on Monday. Thirty-year bonds rose 1-22/32, their yields easing to 4.18% from 4.27%.

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