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While you were sleeping: BusinessWire overnight wrap

Tuesday 9th September 2008

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The US government's plan to backstop mortgage giants Fannie Mae and Freddie Mac was the trigger for a rally on Wall Street, with banks and home builders leading the advance.

The Dow Jones industrial average closed up 290.18 points, or 2.59%, at 11,510.49. The Standard & Poor's 500 Index finished up 25.48 points, or 2.05%, at 1,267.79. The Nasdaq Composite Index was up 13.88 points, or 0.62%, at 2,269.76.

Shares of luxury home builder Toll Brothers 9.4% to US$26.47 on the New York Stock Exchange.

In the financial sector, Bank of America shares added 7.8% to US$34.76 while Citigroup rose 6.6% to US$20.32.

All but one of the 30 companies in the Dow advanced. About 1.7 billion shares changed hands on the NYSE in the busiest trading session since July 23. Treasury 10-year notes gained amid speculation the seizure of Fannie and Freddie won't reverse a US economic slowdown. The dollar increased to the highest in almost a year against the euro.

Most financial companies gained as debt guaranteed by Fannie Mae and Freddie Mac, held by most banks and securities firms, rose in value, and other types of debt securities rallied in sympathy. Fannie Mae current-coupon 30-year fixed rate securities yielded 1.59% more than 10-year Treasury debt, the smallest margin since May. US fixed mortgage rates dropped about a quarter point this morning.

One financial stock bucked the trend: Lehman Brothers. It fell 12.7% to US$14.15 on reports that the investment bank was meeting with potential buyers for its Neuberger Berman asset management unit.

Some traders said the news was a reminder of the still severe credit constraints facing Wall Street and the economy.

Concern about the economy's health caused the Nasdaq to gyrate throughout the session, at one point falling into negative territory before a late afternoon surge.

Nasdaq was held back by losses in the shares of bellwethers, including Google and Apple, which fell 5.5% and 1.4% respectively.

Apple shares fell one day ahead of a highly anticipated event when the maker of the Mac, iPod and iPhone is expected to roll out a new iPod Nano and may give an update on iPhone sales.

US Dollar

The move to bolster Fannie and Freddie boosted the greenback. The US currency touched the strongest this year versus the Swiss. The Dollar Index on ICE futures, which tracks the greenback against currencies of six major US trading partners, rose to a one-year high.

The dollar traded at US$1.4128 per euro at 6am in Tokyo, after rising 1% yesterday when it touched US$1.4054, the strongest since October 9. The dollar was at 108.26 yen, following a 0.5% gain yesterday. The euro traded at 153 yen after dropping 0.5%.

The US currency touched 1.1373 against the Swiss franc yesterday, the strongest since December 28.

ICE's Dollar Index, which gauges the greenback versus six currencies, including the euro, pound and the yen, reached as high as 79.844 yesterday, the strongest since September 18.

US crude futures settled up 11 cents at US$106.34 a barrel after dipping to a five-month low of US$104.70. London's Brent crude futures, trading at a steep discount to the US benchmark, fell 65 cents to US$103.44.

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