IN BRIEF

Securities firms’ shares post steepest drops

Morgan Stanley and Goldman Sachs Group Inc., the biggest U.S. securities firms, tumbled the most ever in New York trading after a government rescue of American International Group Inc. failed to ease the credit crisis. The cost to protect against a default by the banks rose to a record.

Goldman fell 13.92 percent on the New York Stock Exchange and Morgan Stanley plunged 24.22 percent, leading financial stocks to the lowest level in five years.

Morgan Stanley dropped $6.95 to $21.75, the lowest in almost 10 years, in composite trading on the New York Stock Exchange. Goldman slumped $18.51 to $114.50, a three-year low, also on the NYSE.

NEW YORK

Fears of fiscal crisis send oil prices surging

Oil prices rose by $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 rally at least temporarily halted crude’s two-month slide. 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.

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.

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

NEW YORK

Spooked traders seek safety; gold prices soar

Gold prices exploded Wednesday — posting the biggest one-day dollar gain ever– as fears of more credit market turmoil unnerved investors and triggered a flood of safe 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, it was gold’s largest one-day advance since 1999.

The rally was welcome news for Nevada’s gold mining industry — the third-largest producer of gold in the world behind South Africa and Australia.

It came after the government moved overnight to rescue troubled insurer American International Group Inc. with an $85 billion bailout loan.

Longs Drug Stores says ‘no’ to bid by Walgreen

A corporate fight continued Wednesday over California-based Longs Drug Stores Corp., one of the last major regional drugstore chains, when it rejected a $2.8 billion offer by Walgreen Co.

Last week, Walgreen, the nation’s largest retail pharmacy chain, made an eleventh-hour bid to scuttle the previously announced agreement in which CVS Caremark Corp., the second-largest chain, would pay about $2.7 billion for Longs.

In declining the offer, Longs, based in Walnut Creek, said it had concerns about potential antitrust risks and noted that Walgreen hadn’t outlined a "clear road map" to acquire the company.

Longs operates 521 stores in California Hawaii, Nevada and Arizona. The chain also provides pharmacy benefit management services through its RxAmerica subsidiary.

Company gets OK to auction tribal casino

Tropicana Entertainment LLC, the gambling company pushed into bankruptcy after losing its New Jersey license, won a judge’s permission to auction off the Aztar Indian casino in Evansville, Ind.

The casino may be worth as much as $280 million, creditor attorney Edward Weisfelner said Tuesday in court while questioning a Tropicana consultant. Before Tropicana filed for bankruptcy in May, the closely held company agreed to sell the casino for as much as $245 million, according to court records.

Tropicana filed for bankruptcy protection in May after losing its license to operate a casino in Atlantic City last year. The company is owned by closely held Columbia Sussex Corp. of Crestview Hills, Ky., which isn’t in bankruptcy.

Tropicana’s bankruptcy covers its casino in Las Vegas as well as properties at Lake Tahoe and in Mississippi and Louisiana.

NEW YORK

Morgan Stanley said to be discussing merger

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.

John Mack, Morgan Stanley’s chief executive, received a call from Wachovia about a potential deal, according to The New York Times and Wall Street Journal. Both newspapers cited unnamed sources.

Other banks have also expressed interest in Morgan Stanley, according to the reports. The talks are described as preliminary.

Spokesmen for Morgan Stanley and Wachovia declined to comment.

WASHINGTON

AIG bailout said to be good for taxpayers

An observer said Wednesday that the odds are high that the government rescue of AIG will be a good investment for taxpayers.

AIG will pay off the $85 billion loan at a relatively high interest rate, observers say, and the government may make money off its nearly 80 percent equity stake in the company.

"The odds are pretty high that it will end up being a good investment for taxpayers," said Mark Klock, finance professor at George Washington University. "I think that AIG will be able to dispose of assets in an orderly fashion in the next year or so and the government will actually get back the money lent out — and more — in interest," he said.

NEW YORK

In wake of AIG bailout, Treasury prices climb

Demand for short-duration Treasurys surged Wednesday, as investors rushed for the closest thing to cash.

The benchmark 10-year Treasury note rose 0.16 points to 101.41. Its yield slipped to 3.42 percent from 3.43 percent late Tuesday, according to BGCantor Market Data. Yields move in the opposite direction from prices.

The 30-year long bond rose 0.09 points to 107.03, while its yield was virtually unchanged at 4.09 percent.