Stocks Tumble To Lows for Year As Oil Climbs

KIMBERLY PALMER / Wall Street Journal 13aug04

[More below]

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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Dollar Finishes Mostly Lower As Oil-Price Pressure Mounts

SIMONA COVEL and STEVEN VAMES / Dow Jones Newswires 13aug04

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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Oil Prices Set Another Record, As Iraq Clashes Stoke Supply Fears

MASOOD FARIVAR / Dow Jones Newswires 13aug04

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.

Page C4

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