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Rising oil prices and more bad earnings news from the technology sector sent major stock-market measures tumbling to their lowest closes for the year.
The Dow Jones Industrial Average skidded 123.73 points, or 1.2%, to 9814.59, the Standard & Poor's 500-stock index fell 12.56, or 1.2%, to 1063.23 and the tech-stuffed Nasdaq Composite Index tumbled 29.93, or 1.7%, to 1752.49, its lowest close since August 2003. Major measures are now slumping toward important technical thresholds. The Dow industrials are down 8.6% from their 2004 high, a whisper away from the 10% that Wall Street experts consider a correction. The Nasdaq Composite is 18.6% below its 2004 high, dangerously close to the 20% drop that would trigger discussion of a bear market.
Oil prices remained the chief antagonist, continuing to march deeper into record territory. Crude oil for September delivery jumped 70 cents to $45.50 a barrel on the New York Mercantile Exchange. While the gains marked another record for the contract, adjusted for inflation, prices remain well below levels reached in the early 1980s.
Few expect much relief from oil prices anytime soon, and traders have no shortage of worrying issues facing them. Yesterday, fighting raged in Iraq, a tropical storm moved toward the oil-producing region of the Gulf of Mexico and questions about Yukos, Russia's biggest oil exporter, continued to roil. On top of that, traders are warily watching a weekend vote in oil-rich Venezuela concerning the presidency of Hugo Chavez.
"I can't imagine it getting any worse," said Todd Clark, head of listed trading at Wells Fargo Securities in San Francisco.
As oil prices pinch, earnings woes are also buffeting stocks, especially in the technology sector. Before the open, Hewlett-Packard Co. reported dismal third-quarter earnings. The company blamed poor management and told investors it would make immediate changes. The words helped little, with Hewlett-Packard's stock plummeting $2.57, or 13%, to $16.95.
Hewlett-Packard's news comes on the heels of dark tidings from Cisco Systems Inc. earlier in the week. But not all was grim on the tech front. After the close, another tech standout, Dell Inc., reported strong second-quarter earnings and its shares rebounded in after-hours trading.
The mixed technology news, along with rising energy prices, has raised more questions about the economy's strength. Federal Reserve Chairman Alan Greenspan has acknowledged that the economy is moving through a rough patch. But some investors wonder if the weakness will become more than a mere patch. Yesterday morning, the Commerce Department reported that business inventories notched their biggest gain in four years, underscoring the recent fall-off in sales activity.
"A consensus is growing that this economic weakness may have some legs to it," said Liz Ann Sonders, chief investment strategist for Charles Schwab Corp.
Bond prices rallied, buoyed by a successful auction of 10-year Treasury bonds. Treasurys are also receiving a boost as flummoxed stock investors seek safety amid rising energy prices, terror concerns and questions about the economy.
For the year, the Dow industrials have dropped 6.1%, the Nasdaq has fallen 12.5% and the S&P 500 is down 4.4%.
In major U.S. market action:
Stocks fell.1 There were 2,273 declining issues and 974 advancing issues on the Big Board, where 1.4 billion shares traded. On the Nasdaq, where 1.63 billion shares changed hands, 2,249 stocks declined and 828 advanced.
Bonds rose.2 The 10-year Treasury note rose 8/32, or $2.50 for every $1000 invested. The yield, which moves inversely to price, fell to 4.244%. The 30-year bond rose 6/32 to yield 5.043%.
The dollar fell.3 Late in New York, the dollar weakened against the euro to $1.2262, from $1.2217, and the dollar traded at ¥110.86, down from ¥110.90.
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The dollar came under pressure from oil prices at all-time highs, with the U.S. currency losing ground to the euro and Swiss franc.
However, the dollar managed to advance versus the U.K. pound and remained little changed against the yen.
U.S. economic data, including July retail sales and weekly jobless claims, had given the dollar a modest boost early in New York trading, even though the initial reaction to the retail figures had been a sell-off versus the euro.
Traders said that market conditions were thin and relatively illiquid, so the dollar's topsy-turvy movements within the day's ranges were partially dictated by technical factors.
As the dollar struggled to hold on to the morning's gains, light, sweet crude futures for September delivery rose during the afternoon to $45.50 a barrel, a fresh record that placed additional pressure on the dollar versus the euro. Equity markets also remained under pressure all day.
Stocks at their lows for the day and oil at an all-time peak drove the euro higher, said Rebecca Patterson, global currency strategist at J.P. Morgan Chase.
"Currency investors have become armchair commodity experts," Ms. Patterson said.
Late yesterday afternoon in New York, the euro was at $1.2262, up from $1.2217 late Wednesday. The dollar was at ¥110.86 versus ¥110.90 Wednesday. The dollar was down against the Swiss franc, at 1.2550 francs, versus 1.2621 francs, while the pound was at $1.8229, down from $1.8291.
While concerns over the economic impact of oil prices are an overarching concern for currency markets, the morning's activity was dictated largely by trading ahead of, and shortly after, a report on July retail sales from the Commerce Department released early in New York.
The report said retail sales climbed in July at a weaker-than-expected pace of 0.7% versus an expectation for a 1% rise. June figures, however, were revised to a 0.5% decline from a previously reported 1.1% decline, making for an overall increase in retail sales for the two months taken together.
While the weaker-than-expected headline number caused a sharp knee-jerk sell-off in the dollar, buyers quickly stepped in as details about the upward revision for June, as well as a decline in weekly jobless claims, helped calm nerves over the state of the U.S. economy.
"On second glance, the data turned out not to be so bad," said Thomas Molloy, trader at Bank Leumi in New York. He added that the euro's inability to cross higher than $1.2270 for more than a few minutes was all that was needed to turn the market back within its tight range.
The dollar had begun to slide in overnight trading, as doubts mounted ahead of U.S. retail sales and after upbeat European economic data. In particular, French and German figures for gross domestic product early in the European session helped the euro in early trade.
Government flash estimates forecast French second-quarter GDP up at least 0.8% on the previous quarter, pointing to above-consensus annual growth of 2.5% in 2004. This was above consensus. The German economy is expected to grow in line with consensus by 0.5% on the quarter -- its fastest rate since 2001.
Market watchers said that the selling in the dollar ahead of the retail-sales data, and the recovery after, show that there is little conviction in trading and that it will take further economic signposts before the dollar emerges from its range-bound funk.
"The market has every reason to question the [Federal Reserve's] optimism as the Fed sticks with its second-half growth outlook. At the end of the day, disappointments in the data will spell a weaker dollar," said David Gilmore, partner at Foreign Exchange Analytics.
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NEW YORK -- Crude-oil prices soared, extending a push into record territory on fear that heavy fighting in southern Iraq could lead to a disruption in oil supplies.
At the New York Mercantile Exchange, crude-oil futures for September delivery rose 70 cents to settle at a record of $45.50 a barrel, after rising as high as $45.75 earlier in the session. Yesterday's record marks the seventh new settlement high in three weeks.
U.S. forces launched a full-scale assault on the Iraqi shrine city of Najaf to crush a weeklong uprising by militiamen loyal to Shiite cleric Muqtada al-Sadr.
Sadr loyalists have threatened to blow up oil pipelines and port infrastructure if an offensive is launched on the shrine itself in Najaf. A similar threat Monday caused oil officials to briefly stop pumping from Iraq's southern oil wells. Iraq exports 1.7 million barrels of oil a day, about 2% of daily global consumption.
Periodic curtailments in Iraqi supplies and fear of a wider disruption in the Middle East have been a driving force behind a 40% rise in oil prices this year. More recently, concern about the future of embattled Russian oil producer OAO Yukos and instability in oil-rich Venezuela have added to market jitters.
Meanwhile, the Organization of Petroleum Exporting Countries, responsible for more than a third of the world's output, is pumping nearly flat out to meet global oil demand.
With little spare room remaining in OPEC's capacity, "the world cannot afford" another interruption in Iraqi supplies, said Fadel Gheit, market analyst at New York brokerage house Oppenheimer & Co. "The situation in Iraq is really getting worse, and the threat of a supply disruption is very serious."
With supply fears growing, crude futures are likely to continue to move higher, said Peter Beutel, an analyst at Cameron Hanover, a trading advisory firm in New Canaan, Conn. "A lot of people feel this is as bullish a market as we have ever had," Mr. Beutel said. "Fifty dollars is acting like a magnet. A lot of people are talking about it."
In other commodity markets:
COTTON: Prices at the New York Board of Trade fell sharply, spurred by a bearish Agriculture Department report that projected large increases for U.S. and world crops. October futures fell 1.86 cents to 43.02 cents a pound, while December fell 1.61 cents to 43.85 cents a pound.
SOYBEANS: Prices at the Chicago Board of Trade rose sharply, underpinned by the USDA's August crop report, which said the first government survey of the 2004-2005 U.S. soybean crop showed a much smaller crop than the industry anticipated. The August contract rose 50.5 cents to $6.8750 a bushel, and the November soybean contract rose 30.5 cents to $5.8525 a bushel.
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Oil Prices As of August 13, 2004 CRUDE GRADES OFFSHORE-d European ``spot'' or free market prices Latest Previous Year Ago Bonny Lt. 46.02 45.04 29.53 Brent 44.96 44.04 29.25 Forties 47.14 46.04 29.40 Urals-Medit. 41.69 40.69 28.45 DOMESTIC-f Spot market Latest Previous Year Ago Al. No. Slope Pacific Del 45.08 44.20 29.69 La. SW. St. Ja 46.92 45.82 30.99 W. Tex. Int Cush 46.58 45.50 31.08 W Tex. Sour cash, Midl 42.80 41.80 28.50 Open-market crude oil values in Northwest Europe around 17:50 GMT in dlrs per barrel, for main loading ports in country of origin for prompt loading, except as indicated. REFINED PRODUCTS Latest Previous Year Ago Butane, Normal, Mont Belvieu, Texas, gal. 0.9775 0.9575 0.6200 Diesel Fuel 1.2270 1.2035 0.8054 Fuel Oil, No. 2 NY Gal 1.1908 1.1683 0.7976 Gasoline, Unleaded, Premium, NY gal. Non-oxygenated 1.4418 1.3764 1.1469 Gasoline, Unleaded, Premium, NY gal. Oxygenated 1.4568 1.3981 1.1982 Gasoline, Unleaded, Reg., NY gal. Non-oxygenated 1.2978 1.2491 1.0439 Gasoline, Unleaded, Reg. NY gal. Oxygenated 1.3462 1.2974 1.0532 Propane, non-tet, Mont Belvieu, Tex., gal. 0.8800 0.8707 0.5463 Propane, wet-tet, Mont Belvieu, Tex., gal. 0.8788 0.8619 0.5463 RAW PRODUCTS Latest Previous Year Ago Natural Gas, Henry Hub, $ per mmbtu 5.4500 5.5950 4.8350 Footnotes a-Asked. b-Bid. c-Corrected. d-as of 11 a.m. est in Northwest Europe. f-As of 4 p.m. est. Refiners' posted buying prices are in parentheses. n.a.-Not available. z-Not quoted. n-Nominal. r-Revised. Source: Dow Jones Energy Service Weekly Oil Statistics Oil statistics compiled by the American Petroleum Institute for the week ended AUG 6 2004, with changes from the previous week and the total for a year ago (in barrels) follow: Change from: AUG 6 2004 JUL 30 2004 AUG 8 2003 Motor gasoline stocks 210,345,000 -2,443,000 199,968,000 Motor gasoline prod 61,313,000 -2,044,000 59,171,000 Light fuel oil stocks 121,502,000 +3,066,000 116,956,000 Light fuel oil prod 27,545,000 -1,155,000 25,529,000 Heavy fuel oil stocks 32,954,000 -1,082,000 32,674,000 Heavy fuel oil prod 5,215,000 +707,000 4,634,000 Jet fuel stocks 38,433,000 -38,000 37,804,000 Jet fuel production 11,592,000 -133,000 10,521,000 Crude runs daily 15,822,000 +96,000 15,609,000 % Rated Capacity 95.7 +0.2 94.8 Domestic output daily 5,592,000 +0 5,721,000 Domestic crd oil stocks 294,291,000 -5,191,000 281,335,000 Daily crude import U.S. 8,930,000 -915,000 9,772,000 Daily prod import U.S. 2,635,000 -181,000 2,268,00
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