Oil prices, housing keep stocks in check

Stocks ended the day flat, and oil prices and a weak housing picture appear to be why the market couldn't muster much of a move for a second straight day.

The Dow Jones industrials finished with a modest gain: 22 points to 13,635. The Standard & Poor's 500 Index was up 2.7 points to nearly 1,534, and the Nasdaq Composite was up very slightly at just under 2,627.

The gains for the Dow and the S&P 500 were largely due to a 3.2% gain to $39.29 for industrial giant General Electric (GE, news, msgs). That gain was worth more than 11 points to the Dow's gain. IBM Corp. (IBM, news, msgs), up 1.1% to $106.50, contributed 9 points to the Dow's gain.

The market's gain came despite a lukewarm Wall Street reaction to Terry Semel's resignation yesterday as CEO of Yahoo (YHOO, news, msgs). The stock jumped on the news yesterday but was down 1.6% to $27.67 today.

At the same time, the housing sector served notice that the slump isn't over: A Commerce Department report showed housing starts were off in May. If there was good news from that report it was that bond traders pushed interest rates lower. The yield on the 10-year Treasury note fell to 5.086% today from 5.142% yesterday.

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Separately, shares of Dow component Home Depot (HD, news, msgs) were up nearly 4% in after-hours trading to $39.70. The company said it will use the proceeds from the $10.3 billion sale of its building supply business to expand a stock buyback program to $22.5 billion. The after-hours gain was on top of a 0.8% gain to $38.27 in regular trading.

Home Depot is selling its building-supply business -- which provides materials for builders -- to private-equity firms Bain Capital Partners, the Carlyle Group and Clayton, Dubilier & Rice. The deal is expected to close in the retailer's fiscal third quarter.

Only a recession may break crude's run

Crude oil closed at $69.10 a barrel in New York, up a penny from yesterday, but that small gain masked a run-up of nearly 8% so far in June. Wholesale gasoline was off 1.3% to $2.235 a gallon and is off nearly 18 cents a gallon since peaking at about $2.40 a gallon in mid-May.

The big picture for oil prices and consumers is that that the ongoing bull market in energy prices has just moved into a new phase. "Every day, the market will find something new for traders to buy against. On the off days, traders will be taking profits," analyst Peter Beutel wrote in his daily note to clients this morning. "At this point, it will take a recession to halt prices."

That means, potentially, that the drop in pump prices may soon be over until fall, when oil and gasoline prices typically head lower. The national average price of gasoline was $3.00 a gallon, down from $3.18 a gallon a month ago but up 14 cents from this time last year.

The rise in energy prices has pushed energy stock prices higher so far this month. The energy sector of the S&P 500 is by far the strongest of the 10 sectors of the index, up about 4.4% in June. The 28 energy stocks Market Dispatches tracks are all higher this month, led by Anadarko Petroleum (APC, news, msgs), up 11.5%. The stock was up 0.8% to $55.33 today.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$69.10	$69.09	$0.01	7.95%	13.19%
Heating oil (per gallon)	$2.0268	$2.0342	-$0.0074	7.65%	26.84%
Natural gas (per million BTU)	$7.5190	$7.6900	-$0.1710	-5.24%	19.37%
Unleaded gasoline (per gallon)	$2.2346	$2.2643	-$0.0297	-0.74%	39.48%

Wall Street is lukewarm about Yahoo

Terry Semel's resignation prompted a ton of speculation the company might become an acquisition candidate. But Jerry Yang, the company's co-founder, dashed those hopes when he pledged Yahoo would be a "vibrant independent company," Reuters said.

Options tracker Jon Najarian of optionMONSTER.COM told Market Dispatches that options trading patterns today suggest investors are very bearish about the stock.

Susan Decker, a former executive vice president and head of Yahoo's advertising business, was named Yahoo's president. Semel will remain on board at Yahoo as chairman in a nonexecutive role.

The shake-up at Yahoo came amid growing frustrations among the company's shareholders who have watched the company lose market share in Internet search to Google (GOOG, news, msgs). In April, Yahoo's share of the market was 21.9%, less than half of Google's 55.2%.

• Video: More on Yahoo's shake-up

Just last week, shareholders vented about Semel's huge pay package at the company's annual shareholder meeting. Semel took home $71.7 million in 2006, making him the highest-paid CEO of all Standard & Poor's 500 companies, according to an Associated Press analysis.

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Shares of Yahoo have fallen 30% since the end of 2005, while Google shares have risen 22% over the same period.

Why pin the company's future on Jerry Yang, who co-founded Yahoo with David Filo in 1994?

"I think they're trying to take a page out of Apple's storybook from 1997, when Jobs came back to Apple," Piper Jaffray analyst Gene Munster told CNBC this morning.

So that means the company is tying its future squarely on Yang. But there's a lot of work ahead.

Analysts pointed to Yahoo's warning that its display advertising sales are slowing as the latest sign that the company is still wrestling with its financial performance.

But with intensifying competition from Google, Yahoo needs to make a move soon to shore up its business model, they said. "We believe Yahoo will consider partnerships with Comcast (CMCSA, news, msgs), AT&T (T, news, msgs), Time Warner's (TWX, news, msgs) America Online, News Corp. (NWS, news, msgs)/MySpace, and Microsoft (MSFT, news, msgs)," RBC Capital Markets analyst Jordan Rohan wrote in a note to clients. (Microsoft is the publisher of MSN Money.)

A drop in housing starts

There's trouble in housing -- again.

A Commerce Department report today said housing starts in May had fallen 2.1% to a seasonally adjusted annual pace of 1.47 million.

Though the number is better than economists had predicted -- they were expecting a decline to an annual rate of 1.46 million from 1.53 million in April -- "there is way too much supply," Maria Fiorina Ramirez chief economist Joshua Shapiro told Bloomberg News. "If you're a home builder with inventory, the market is skewed against you."

Building permits, which are a key indicator of builders' confidence, rose 3% in May to 1.5 million. Economists had expected a slight rise to 1.47 million from April's 1.46 million, which was a nine-year low.

"Builders are unlikely to increase construction until excess inventory is cleared and sales start to pick up in earnest," Lehman Bros. economist Michelle Meyer told Bloomberg. Building permits won't really pick back up until next year, Meyer said.

Home building stocks were largely flat today. The Philadelphia Housing Sector Index ($HGX.X) was down slightly at 224.74.

Short hits from the markets -- 4 p.m.

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	4.515%	4.410%	0.105	-1.63%	-7.57%
5-year Treasury note yield	5.002%	5.063%	-0.061	3.07%	6.40%
10-year Treasury note yield	5.086%	5.142%	-0.056	4.01%	7.98%
30-year Treasury bond yield	5.198%	5.252%	-0.054	3.73%	7.89%
Currencies
U.S. Dollar Index	82.29	82.48	-0.19	0.05%	-1.37%
British pound in dollars	$1.9893	$1.9833	0.0059	0.44%	1.51%
Dollar in British pounds	£0.5027	£0.5042	-0.0015	-0.44%	-1.49%
Euro in dollars	1.3435	1.3417	0.0018	-0.21%	1.79%
Dollar in euros	€ 0.7443	€ 0.7453	-0.0010	0.22%	-1.76%
Dollar in yen	¥123.32	¥123.61	-0.29	1.35%	3.61%
Commodities
Gold	$664.70	$659.90	$4.80	-0.30%	4.18%
Copper	$3.3995	$3.4200	-$0.02	0.12%	18.41%
Silver	$13.3250	$13.2350	$0.09	-1.08%	3.02%
Crude oil (NYMEX) (per barrel)	$69.10	$69.09	$0.01	7.95%	13.19%

Best Buy profit falls

Electronics retailer Best Buy (BBY, news, msgs) reported an 18% drop in profit for its fiscal first quarter.

Net income fell to $192 million, or 39 cents per share, from $234 million, or 47 cents per share, in its opening quarter a year ago.

The consensus estimate had been for 50 cents per share on revenue of $7.85 billion.

Best Buy's sales rose 14% to $7.93 billion, the smallest increase in three quarters. "There's a lot of question marks out there, especially in terms of flat-panel-TV demand," Alpine Woods Capital Investors analyst Bryan Keane told Bloomberg.

Best Buy shares fell 5.9%, to $45.18.

Cadbury to sell Dr Pepper

I'm a Pepper, you're a Pepper, but Cadbury Schweppes (CSG, news, msgs) isn't singing the Dr Pepper tune anymore.

The British candy giant said today that it expects to sell its U.S. beverage unit, which includes Dr Pepper, Snapple and 7-Up, to focus on its candy and gum business. The beverage unit makes up 15% of the U.S. soda market, according to Bloomberg.

The company also said it plans to cut 7,500 jobs, or 15%, of its work force.

In March, Cadbury had announced plans to separate its candy and beverage businesses but had not stated whether it would spin the business off or sell it.

Today, the company said it would change its name to Cadbury once a sale is final. The stock was down 0.5% to $55.80 in New York today.

BHP Billiton now bidding for Alcan?

Just yesterday, there were reports that Australian mining company BHP Billiton (BHP, news, msgs) was eyeing aluminum giant Alcoa (AA, news, msgs). But the word today was that BHP Billiton has hired Merrill Lynch (MER, news, msgs) to explore the possibility of acquiring Alcan (AL, news, msgs), Alcoa's Canadian rival.

BHP Billiton could be Alcan's white knight: Alcan had received a hostile $27 billion bid from Alcoa in May, but Alcan's board had urged shareholders to reject the bid. BHP representatives would not comment on the takeover talk today.

BHP Billiton was up 0.4% to $58.99 in New York. Alcan was also up 0.9% to $84.31, and Alcoa was off 0.7% to $41.58.

Expedia buys back stock

Online travel company Expedia (EXPE, news, msgs) announced plans to buy back $3.5 billion, or 42%, of its outstanding shares.

Shares jumped 14.3%, to $29.14 on the day, tops among stocks in the Nasdaq-100 Index ($NDX.X).

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Last week, rumors circulated that the company could be acquired by its chairman, media mogul Barry Diller.

"With this action, we couldn't be clearer that the management and the board of this company are confident in the value of Expedia and in its long-term future," Diller said in a statement about the buyback.

Delta to order Boeing Dreamliners

The battle of the aircraft makers continues.

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Just a day after Airbus announced a big order for its A350 jets from US Airways (LCC, news, msgs), Boeing (BA, news, msgs) is expected to get an order for 125 of its new 787 Dreamliner jets from Delta Air Lines (DAL, news, msgs).

Delta, which just recently emerged from bankruptcy protection, is still negotiating the order, The Wall Street Journal reported. If it goes through, the roughly $20 billion order would be Boeing's biggest order for the 787 jet so far this year.

Delta was up 1.8% to $18.87; Boeing was down 0.5% to $96.92.

By Charley Blaine and Elizabeth Strott