While you were sleeping: BusinessWire overnight wrap

Tuesday 26th August 2008

Shares on Wall Street fell, exacerbated by light volume, amid persistent concern about the impact of the credit crisis with the latest focus on insurer American International Group.

The Dow Jones industrial average was down 241.73 points, or 2.08%, at 11,386.33. The Standard & Poor's 500 Index was down 25.28 points, or 1.96%, at 1,266.92. The Nasdaq Composite Index was down 49.12 points, or 2.03%, at 2,365.59.

Trading volume was light on the New York Stock Exchange, with about 847 million shares changing hands, well below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.42 billion shares traded, also below last year's daily average of 2.17 billion.

American International Group, the world's biggest insurer, was among the top drags on the Dow, with its shares falling to a 13-year low. Credit Suisse cut the company's share price target and forecast a huge loss for the insurer.

AIG fell 5.5% to US$18.78 for the biggest drop in the Dow average. Credit Suisse analyst Thomas Gallagher predicted AIG will lose 86 cents a share in the third quarter. Previously he forecast a 13-cent profit. "Recent deterioration" in debt holdings may cause losses in the firm's credit-default swaps, Gallagher wrote today in a research note. He rates New York-based AIG neutral.

The KBW Bank Index tumbled 3.4% as all 24 of its companies decreased. Washington Mutual lost 23 cents to US$3.60. Huntington Bancshares retreated 51 cents to US$7.00. SunTrust Banks Inc., the largest bank based in Georgia, fell 6% to US$40.15 after Citigroup Inc began covering it with a sell rating.

Columbian Bank, with US$752 million in assets and US$622 million in total deposits, was shuttered by the Kansas state bank commissioner's office and the Federal Deposit Insurance Corp on August 22.

Adding to the gloom, the International Monetary Fund trimmed its global growth forecasts for 2008 and 2009 in a note prepared for a meeting of the Group of 20 nations, a G20 finance official told Reuters.

In other stock news, Alcoa, the world's third-largest aluminum producer, retreated 86 cents to US$31.42. Freeport-McMoRan tumbled US$2.79 to US$87.81. Gold futures for December delivery fell US$7.80, or 0.9%, to US$825.70 an ounce in New York and November aluminum fell 1% in Shanghai. The London Metals Exchange was closed for a bank holiday.

Dell Inc., Sears Holdings Corp. and Big Lots Inc. are among the companies scheduled to report earnings this week.

Yen advances

The yen and the Swiss franc rose against all of the other major currencies on bets credit market losses would widen, prompting investors to sell higher-yielding assets and pay back loans in Japan and Switzerland.

The yen gained 0.7% to 109.30 per dollar at 4:24pm in New York, from 110.07 on August 22. The euro declined 1% to 161.29 yen, from 162.83. The dollar rose 0.3% to US$1.4756 per euro, from US$1.4793. The Swiss franc advanced 0.5% to 1.6168 per euro and 0.3% to 1.0958 per dollar.

Japan's currency climbed 1.3% to 77.01 per New Zealand dollar and the franc increased 1.3% to 7.08 South African rand on reduced demand for carry trades, in which investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5% and Switzerland's 2.75% benchmark compare with 8% in New Zealand and 12% in South Africa.

The 10-year US Treasury note yield declined nine basis points, or 0.09 percentage points, the most since August 12, to 3.78% at 4:39pm in New York, according to BGCantor Market Data. The yield touched 3.76%. The 4% security due in August 2018 rose 3/4, or US$7.50 per US$1,000 face amount, to 101 26/32.

Two-year yields dropped nine basis points, also the most since August 12, to 2.33%.

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