While you were sleeping: BusinessWire overnight wrap

Thursday 17th July 2008

Plans by Wells Fargo & Co to increase its dividend, even as its profit falls, ignited a rally in bank stocks that help spur a rebound in all three major US sharemarkets on Wednesday.

Wells Fargo, the fifth largest US bank, surged 32.8%. The Standard & Poor's 500 Financials Index surged 12% as every bank rose at least 10%.

The decision by Wells Fargo to boost its dividend allayed some concerns about financial companies just days after IndyMac collapsed in one of the biggest bank failures in US history.

The S&P 500 added 30.45 points, or 2.5%, to 1,245.36, rebounding from its lowest level since 2005 with its steepest gain since April. The Dow Jones Industrial Average climbed 276.74, or 2.5%, to 11,239.28, while the Nasdaq Composite Index increased 69.14, or 3.1%, to 2,284.85. Four stocks rose for each that fell on the New York Stock Exchange.

Investors' fears about the US economic outlook also got a reprieve from another drop in the price of crude oil, after a US government report showed that US inventories unexpectedly increased and demand continued to decline in the world's biggest economy.

US crude futures fell $4.14 to settle at $134.60 a barrel, adding to Tuesday's drop of $6.44 and bringing oil close to $13 below last week's all-time peak. London Brent crude fell $2.56 to $136.19 a barrel.

As a result, energy stocks took it on the chin posting the steepest decline among 10 industries in the S&P 500, dropping 2.5%.

Exxon Mobil, the world's largest oil company, fell 1.7% to $80.81. Chesapeake Energy, the second-biggest US independent natural-gas producer, slumped 4.7% to $56.67.

US Dollar Gains

The US dollar got a boost from the stocks rally as well from the minutes of the Federal Reserve's June meeting, which showed officials believed inflation pressures meant the next interest rate move was likely to be an increase.

The dollar rose 0.6% to $1.5822 per euro at 4:35pm in New York, from $1.5911 yesterday, when it declined to a record low of $1.6038. The dollar appreciated 0.4% to 105.14 yen, from 104.73. The euro declined 0.2% to 166.34 yen, from 166.65.

The Australian dollar decreased 0.5% to 97.42 U.S. cents as the head of the central bank said the chances of "keeping inflation low over the medium term are good," indicating the Reserve Bank might be done raising its target lending rate, now 7.25%. The Aussie, as the currency is known, touched 98.50 US cents yesterday, the highest level since 1983.

The yield on the 30-year US government bond advanced 13 basis points to 4.59% at 4:12pm in New York, according to BGCantor Market Data. It touched 4.60%, the highest since June 27. The price of the 4.375% security due in February 2038 fell 2, or $20 per $1,000 face amount, to 96 19/32. The bond's yield has risen by 12 basis points or more only four times this year.

The 10-year note's yield gained 12 basis points to 3.94%, and the two-year note's yield rose 6 basis points to 2.43%.

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