While you were sleeping: BusinessWire overnight wrap

Friday 25th July 2008

Renewed concerns about the outlook for the US housing market, driven by a report showing existing home sales have dropped to a 10-year low, sent financial shares sharply lower, with Wall Street shedding more than 2%.

The Dow Jones industrial average fell 283.10 points, or 2.43%, to close at 11,349.28. The Standard & Poor's 500 Index slid 29.65 points, or 2.31%, to 1,252.54, while the Nasdaq Composite Index shed 45.77 points, or 1.97%, to 2,280.11.

Declining stocks outnumbered advancing ones by 4 to 1 on the NYSE and by 2 to 1 on the Nasdaq.

Shares of mortgage finance companies Fannie Mae and Freddie Mac fell more than 18%, just a day after the US House of Representatives approved a rescue package that would include a US government lifeline for the two companies.

Fannie Mae's stock lost nearly 20% to $12.02, while Freddie Mac's stock was down 18.4% at $8.81.

Other financial shares also fell including Citigroup, Goldman Sachs and Bank of America. Washington Mutual also dropped.

A total of $5 trillion of mortgage loans belong to risky asset categories, Bill Gross, manager of the world's largest bond fund at Pacific Investment Management Co, said in commentary posted on the firm's website today.

His $1 trillion forecast implies that credit-market losses are less than halfway over. Since the start of 2007, global financial firms have reported $468.1 billion in losses and writedowns, according to data compiled by Bloomberg News. Firms worldwide have raised $344.6 billion of capital since the third quarter of 2007.

Also contributing to the sour sentiment was Ford Motor Co, which plunged after reporting a loss twice as big as analysts estimated.

US oil futures rose $1.05 to settle at $125.49 a barrel after a drop of more than 5% over the previous two sessions. Earlier during Thursday's NYMEX session, oil hit an intraday high above $126.

Housing Recession

Sales of previously owned US homes fell in June to the lowest level in a decade as tumbling real-estate prices and consumer confidence signaled no end in sight to a housing recession now in its third year.

Resales dropped 2.6% to a lower-than-forecast 4.86 million annual rate from a 4.99 million pace the prior month, the National Association of Realtors said today in Washington. The median home price dropped 6.1% from June 2007.

The housing slump may deepen further after mortgage rates climbed to the highest in a year this month and turmoil engulfed Fannie Mae and Freddie Mac, which account for more than two- thirds of new home-loan financing. A record 18.6 million houses, apartments and condominiums stood empty in the last three months as the industry's recession reverberated through communities, separate figures showed today.

Benchmark 10-year Treasury notes traded 27/32 higher in price at 98-28/32. The yield, which moves inversely to the price, was 4.01%, down from 4.12% late on Wednesday.

Two-year note yields traded at 2.63% from a high yield of 2.82% in an auction of the notes on Wednesday.

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