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UPDATED:While you were sleeping: BusinessWire overnight wrap

Thursday 10th July 2008

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The Standard & Poor’s 500 Index entered into a bear market on Wednesday, catching up with both the Dow Jones Industrial Average and the Nasdaq amid signs that the US economy would need more time to recover from the credit crisis.

Fannie Mae and Freddie Mac led financial shares to their biggest decline in six years after Fannie's borrowing costs surged on concern it won't be able to fund its business.

Merrill Lynch shares fell more than 9%, after Fitch Ratings said it might cut the US investment bank's debt rating, given expected ongoing write-downs and diminished prospects for earnings.

The outlook for the world’s biggest economy also took a hit from comments by the chief executive of Cisco Systems who said customers of the computer networking company expected the recovery to be delayed until early 2009 from late 2008.

The S&P 500 lost 29.01 points, or 2.3%, to a two-year low of 1,244.69, with a third of the drop occurring in the last 20 minutes of trading.

The S&P 500 has had eight previous bear markets since 1962, according to data compiled by Birinyi Associates, a stock research firm based in Westport, Connecticut. Stocks have fallen an average of 33% over 382 days during those retreats.

The Dow Jones industrial average shed 236.77 points, or 2.08%, to 11,147.44. The Nasdaq Composite Index fell 59.55 points, or 2.60%, to close at 2,234.89.

Cisco shares fell 5.7% to $21.58. UBS said it expected enterprise spending to remain challenging. Shares of other big technology companies also fell, with chip-maker Intel down 5.3% at $19.81. IBM's shares fell 2.8% to $120.40 and were the top drag on the Dow.

Profits at S&P 500 companies declined 11% on average in the second quarter, according to the average estimate of analysts surveyed by Bloomberg News. Income is projected to slump 60% on average at financial companies.

Global stock markets have erased more than $11 trillion this year as record oil prices and more than $400 billion in credit-related losses threaten to push the US into recession.

US Dollar Falls

The dollar traded at $1.5744 per euro at 6:30am in Tokyo, after falling 0.5% yesterday. It was the biggest drop since July 2. The US currency traded at 106.76 yen, following a 0.7% decrease. The yen was at 168.07 per euro, after advancing 0.2%.

The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six US trading partners, fell 0.6% to 72.580 yesterday.

European shares closed sharply higher on Wednesday with recently battered banks staging a comeback and miners rallying on the back of solid earnings from US group Alcoa.

The FTSEurofirst 300 index of top European shares closed 1.71% higher at 1,181.19 points, recouping Tuesday's losses.

Banks added nearly 6 points to the index, with Deutsche Bank up 4.8%, Credit Suisse up 4.1% and Barclays up 5.1%.

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