AP
Business Highlights
Wednesday September 17, 6:53 pm ET

Stocks tumble after government bailout of AIG

NEW YORK (AP) -- Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government's bailout of insurer American International Group Inc. left investors with little confidence in many banking stocks.

The Dow fell 449.36, or 4.06 percent, to 10,609.66, finishing not far off its lows of the session.

As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.

The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company.

Shares of Morgan Stanley and Goldman Sachs plunge

NEW YORK (AP) -- Shares of Goldman Sachs and Morgan Stanley plunged on Wednesday, a sign that investors fear they can't survive in their present form as the last two major independent investment banks.

Executives of both companies insisted a day earlier, when they were reporting profits for the most recent quarter, that they do have the financial wherewithal to go it alone.

But analysts said the question increasingly is whether continued market turmoil could force them to acquire or be acquired by commercial banks, whose deposit-taking operation would provide a stable source of funding.

Morgan Stanley and Wachovia Corp. are in talks about a possible combination as the investment bank tries to come up with ways to survive the ongoing credit crisis, according to media reports.

With stock sinking, WaMu appears headed for sale

Ailing bank Washington Mutual Inc. appeared headed toward a sale Wednesday after a major investor removed a potential stumbling block and nervous banking regulators began approaching the most logical buyers.

The New York Times, citing unidentified people familiar with the matter, said an auction of the bank was already under way, and The Wall Street Journal reported Wells Fargo & Co. and Citigroup Inc. expressed interest in a takeover.

A concession by investment firm TPG, which injected $7 billion into WaMu five months ago, may have opened the way to a sale -- or, failing that, made it easier for the bank to raise another round of capital.

Housing construction plunges 6.2 pct. in August

WASHINGTON (AP) -- Construction of new homes and apartments fell to the weakest pace in 17 years in August, far more than expected, but lower mortgage rates and tax credits have given builders some glimmer of hope of a possible rebound.

Housing construction dropped a surprising 6.2 percent last month, the Commerce Department reported Wednesday, far larger than the 1.6 percent decline analysts had been expecting.

It was the slowest building pace since January 1991, but that should help clear out bloated inventories of unsold homes. Building activity is on track to slide below the 1 million-mark for the whole year, the first time that has happened in more than six decades.

Barclays may acquire more of Lehman

LONDON (AP) -- Barclays PLC said Wednesday it may pick up some of Lehman Brothers assets and employees in Europe and Asia, on top of the British bank's deal to acquire key U.S. operations from the failed investment bank.

Barclays PLC, the third-largest British bank, took advantage of Lehman Brothers Holdings Inc.'s bankruptcy reorganization to reach a deal on Tuesday for Lehman's North American investment banking and trading operations for just $250 million.

Barclays also picked up Lehman's New York headquarters and two data centers in New Jersey for $1.5 billion, all subject to court and regulatory approval.

Oil spikes $6 on safe-haven buying, weak dollar

NEW YORK (AP) -- Oil prices shot up $6 a barrel Wednesday, rebounding as fears of a spreading crisis in the U.S. financial sector sent skittish investors scrambling out of stocks and into hard assets.

The big rally at least temporarily halted crude's steep, two-month slide and brought prices back within striking distance of $100. Investors were frantically buying the same commodity that until this week they shunned in the belief that the slowing global economy was eroding demand for energy.

But analysts said oil is unlikely to resume its upward climb.

Gold prices post biggest 1-day gain ever

NEW YORK (AP) -- Gold prices exploded Wednesday -- posting the biggest one-day gain ever in dollar terms -- as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying.

Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever; gold's previous single-day record was a $64 gain on Jan. 29, 1980. In percentage terms, it was gold's largest one-day advance since 1999.

Treasury announces debt auctions for Fed

WASHINGTON (AP) -- The Treasury Department will begin selling bonds for the Federal Reserve in an effort to help the central bank deal with unprecedented borrowing needs resulting from the current credit crisis.

Treasury officials said Wednesday that the new program would be conducted in the same way that the government sells billions of dollars of regular Treasury securities each week to finance the government's budget deficits.

Applications to refinance home mortgages surge

NEW YORK (AP) -- Homeowners rushed to take advantage of last week's drop in interest rates following the government's takeover of Fannie Mae and Freddie Mac, but rates are rising again on investor fears about the eroding conditions in financial markets.

A mini-refinance boom started last Thursday but ended early Monday, said Pava Leyrer, president of Heritage National Mortgage in Michigan. The average rate on a 30-year, fixed rate mortgage was 6.14 percent on Wednesday, up from 6.02 percent last week after the government bailed out Fannie and Freddie, though still below last month's 6.65 percent, according to HSH Associates.

By The Associated Press

The Dow fell 449.36, or 4.06 percent, to 10,609.66, finishing not far off its lows of the session. On Monday, the Dow lost 504 points, the largest tumble since its drop following the September 2001 terror attacks. On Tuesday, it rose 141 points, after the Fed decided to leave interest rates unchanged.

Broader stock indicators also fell sharply Wednesday. The Standard & Poor's 500 index dropped 57.21, or 4.71 percent, to 1,156.39, while the Nasdaq composite index fell 109.05, or 4.94 percent, to 2,098.85.

Light, sweet crude for October delivery rose $6.01, or 6.59 percent, to settle at $97.16 a barrel on the New York Mercantile Exchange. Prices tumbled more than $5 to close at $91.15 on Tuesday.

Prior to the rally, oil had fallen about $55 -- or 38 percent -- since hitting a record $147.27 on July 11.

In other Nymex trading, heating oil futures rose 10.5 cents to settle at $2.8247 a gallon, while gasoline future added 6.22 cents to settle at $2.463 a gallon. Natural gas futures gained 63.6 cents to settle at $8.195 per 1,000 cubic feet.

In London, November Brent crude rose $5.62 to settle at $94.84 a barrel.