Stocks in U.S. Can't Dig Out of the Red

After rocketing ahead in early action, longer-dated U.S Treasury securities were declining in price. The 10-year note was down 11/32, yielding 3.72%. The 30-year was losing 20/32 to yield 4.08%.

Overseas, European indices, such as London's FTSE and Frankfurt's DAX, were falling sharply. In Asia, the Nikkei in Japan and the Hang Seng in Hong Kong closed with significant losses.

The foreign exchange market was seeing monumental moves in some cases, with the dollar registering significant changes against its major counterparts. The euro was losing 2.1% to $1.26, and the pound was sinking 1.4% to $1.59. The Australian dollar was off 5.2% against the greenback.

However, the dollar was surrendering 1.6% to the yen.

Lending markets slowed a trend of loosening that had emerged in previous sessions. Three-month dollar Libor, a measure of the rate banks charge one another for large loans, was down slightly at 3.52%. The cost of overnight borrowing rose 7 points to 1.28%.

In company news, PNC Financial Services (PNC Quote) and National City (NCC Quote) announced a merger agreement. PNC will buy National City for $5.2 billion, $2.23 a share in a cash-and-stock deal. PNC said that as part of the deal it sold $7.7 billion in preferred stock and related warrants to the government. PNC shares added 4.1% to $59.21, while National City plummeted 25% to $2.07.

Elsewhere, U.K. insurance firm Prudential(PUK Quote) was considering the purchase of segments of struggling U.S. insurer AIG(AIG Quote). AIG has been attempting to sell parts of its asset portfolio to avoid going bankrupt. Prudential slipped 13% to $9.20, and AIG skidded 19% to $1.70.