While you were sleeping: BusinessWire overnight wrap

Thursday 28th August 2008

An unexpected advance in orders for durable goods in the US eased some concerns about the outlook for the world's biggest economy, helping to extend the current Wall Street rally to a third day.

Financials fuelled the advance. Bank of America Corp and American Express each climbed more than 2%. Fannie Mae and Freddie Mac rallied more than 15% each after the largest US mortgage finance companies sold US$3 billion in debt at yields which suggest they won't need a government bailout.

The Dow Jones industrial average was up 89.64 points, or 0.79%, at 11,502.51. The Standard & Poor's 500 Index was up 10.12 points, or 0.80%, at 1,281.63. The Nasdaq Composite Index was up 20.49 points, or 0.87%, at 2,382.46.

Not to be outdone by financials, energy shares rallied as the price of oil rose amid signs Tropical Storm Gustav might intensify into a hurricane as it headed into the Gulf of Mexico, a large oil and natural gas production area.

Trading volume, which has been light for much of August, was especially thin ahead of the US Labor Day holiday weekend. US markets will be closed on Monday. Thin trade can exaggerate price moves.

Blood thinner

Health-care companies had the only decline among 10 S&P 500 industries, falling 0.1%. Pfizer and Bristol-Myers Squibb dropped after saying their experimental blood thinner apixaban worked no better than an older pill in a study, causing them to delay seeking US regulatory approval.

US airlines retreated after Citigroup Inc said demand might weaken and "significant risks remain" for the industry as crude oil rebounded.

"US airlines have yet to see a severe consumer downturn despite gloomy economic data," analyst Andrew Light wrote in a note.

Investors should sell shares of AMR, parent of American Airlines, the world's largest carrier, because they had more than doubled since falling to a five-year low last month, Light said.

US Treasuries ended higher after spending much of the day under pressure from the stronger-than-expected July durable goods report. The late-day turnaround sent the benchmark 10-year yield back to its lowest level since May 13.

Treasuries have returned 1.3% this month, and 4% since the start of the year, according to Merrill Lynch's US Treasury Master Index.

The US government on Wednesday sold a record US$32 billion of two-year securities at the lowest yield since April. It is set to sell US$22 billion worth of five-year notes on Thursday.

The government's bigger debt sales are needed to fund a widening budget deficit, which will grow to a record US$482 billion next year, the Bush administration said last month. The Treasury predicted it would borrow US$171 billion this quarter, 53% more than initially forecast, according to Bloomberg News.

The US dollar has a less than stellar session after a European Bank official hinted that interest rates could rise in Europe to quell persistent inflation pressure.

In late afternoon trading, the euro was up 0.5% on the day at US$1.4725, rallying from six-month lows at US$1.4570 hit on Tuesday.

The dollar was little changed versus the yen, but had an upward bias for most of the session.

Sterling was down 0.3% at US$1.8345, after earlier touching a two-year trough at US$1.8286.

The British pound has dropped 9% from a three-month peak struck in mid-July, and is currently on track to post its worst monthly performance against the dollar since 1992.

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