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While you were sleeping: BusinessWire overnight wrap

Tuesday 22nd July 2008

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Wall Street ended little changed on Monday as concerns about drug makers' stocks offset a better-than expected result from Bank of America.

However, US shares appeared poised to fall when trading opens on Tuesday after Apple Inc, Sandisk and American Express reported after the closing bell results and forecasts that disappointed investors.

The S&P 500 slipped 0.68 point to 1,260. The Dow Jones Industrial Average decreased 29.23, or 0.3%, to 11,467.34, and the Nasdaq Composite Index lost 3.25, or 0.1%, to 2,279.53. Seven stocks advanced for every five that fell on the New York Stock Exchange as all 39 energy companies in the S&P 500 advanced.

Merck's and Schering-Plough's shares fell after their lucrative shared cholesterol-fighting drug failed a clinical trial and for the first time raised questions about its potential cancer risk. The two drug makers had delayed the release of their earnings to after the closing bell.

The price of oil further dampened the mood as it rose more than $2 to above $131 a barrel, adding to concerns about the impact of higher fuel costs on consumer spending.

In contrast, bank stocks added to last week's gains, after Bank of America joined its rivals Wells Fargo, JPMorgan Chase and Citigroup in reporting unexpectedly strong results.

Apple Disappoints

Apple dropped 3.7% to $160.21 in trading after U.S. exchanges closed. The maker of Macintosh computers and iPod media players predicted fourth-quarter profit of $1 a share and sales of $7.8 billion. Analysts in a Bloomberg survey were anticipating $1.24 a share in profit and $8.3 billion in sales.

American Express lost 9.8% to $36.89. The biggest US credit-card company by purchases said second-quarter profit fell 37% as more consumers defaulted on loans.

In late afternoon trading, the euro was last up 0.3% to $1.5898, below last week's record high of $1.6037 according to Reuters Dealing.

Against the yen, the dollar slipped 0.2% to 106.69 yen, while the euro hit a record high at 169.64 yen, according to electronic trading platform EBS.

The yield on the benchmark 10-year note fell 6 basis points to 4.04% at 5:19pm in New York, according to BGCantor Market Data. The price of the 3.875% security due in May 2018 rose 14/32, or $4.38 per $1,000 face amount, to 98 22/32.

The two-year note's yield decreased five basis points to 2.59%.

Fannie, Freddie

The spread between five-year debt issued by government-sponsored enterprise Fannie Mae and five-year Treasury notes has narrowed to 81.4 basis points, the lowest in a week. The Treasury Department announced a rescue plan on July 13 for Fannie and Freddie Mac, together the largest US mortgage- finance providers.

The market was also awaiting a speech from Philadelphia Federal Reserve Bank president Charles Plosser on Tuesday, while New York Fed president Timothy Geithner and US Securities and Exchange Commission chairman Christopher Cox are set to testify before a US House Financial Services Committee hearing on regulation on Thursday.

The Fed releases its Beige Book anecdotal summary of the economy on Wednesday where it will have to balance weakness in the housing market and the squeeze in credit markets against rising inflation. US home sales data is also due this week.

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