Despite crude's record, stocks trim losses

By Charley Blaine and Elizabeth Strott

Crude oil briefly topped a record high set 28 years ago as surging commodity prices continued to pressure stocks.

A late-day stock rally trimmed a 105-point loss for the Dow Jones Industrial Average to just 8 points; it closed at 12,259. The Standard & Poor's 500 Index closed up 1 point to 1,331, but the Nasdaq Composite Index closed down 13 points to 2,259.

Crude reached an intraday high of $103.95 per 42-gallon barrel in New York around 9 a.m. That topped an April 1980 record price of $39.50 a barrel, which would translate to $103.76 a barrel in today’s money.

But profit-taking set in, and crude fell back at the close, finished at $102.45 a barrel, up 61 cents from Friday. Futures in unleaded gasoline, natural gas and heating oil were also higher on the day, although profit-taking hit those commodities.

Precious metals prices also rose, with gold for April delivery closing at $984.20 an ounce, up 1% from Friday and a new closing high. Gold's rise prompted many traders to predict that the metal will top $1,000 an ounce soon and could reach $1,200.

• Get free, real-time stock quotes on MSN Money

Investors are pouring money into commodities, substituting crude oil for stocks as a hedge against inflation and a weakening U.S. dollar, analyst Peter Beutel told clients in a note this morning.

Crude oil jumped 11% in February, and natural gas finished the month up more than 16%. The retail price of gasoline was $3.165 a gallon today, AAA's daily survey showed, up from $2.987 a month ago and up 28% from a year ago.

The Organization of Petroleum Exporting Countries meets on Wednesday and is expected to leave its production levels unchanged. The oil-producing group had suggested last month that it might curb production soon to make up for a seasonal slowdown in demand.

A struggle just to break even

Combined with weakness in big technology stocks and Warren Buffett's comment that he doesn't see stocks as especially cheap, the major averages struggled for the entire day.

The Dow was pressured because of weakness in aerospace giant Boeing (BA, news, msgs), which lost a $40 billion contract for Air Force tankers to Northrop Grumman (NOC, news, msgs) and the parent of Airbus on Friday. Boeing closed down 2.6% to $80.67, which subtracted about 19 points from the Dow.

Boeing, however, was not the worst performer among the 30 Dow stocks. That fell to Citigroup (C, news, msgs), down 2.6% to $23.09. JPMorgan Chase (JPM, news, msgs) was down 2% to $39.82.

General Motors (GM, news, msgs), Ford Motor (F, news, msgs), Toyota Motor (TM, news, msgs) and Chrysler Group posted lower U.S. sales in February as tough economic conditions and high gasoline prices continued to crimp demand, especially for pickups and SUVs. Ford saw a 27% decline in sales of its Explorer, once its big money maker.

Honda Motor (HMC, news, msgs) and Nissan (NSANY, news, msgs) posted small gains.

Ford, GM, Honda and Nissan shares were all lower; Toyota was up slightly.

Energy stocks continued to hold up the market, after a mid-afternoon dip. ExxonMobil (XOM, news, msgs) at one point was down 0.5% to $86.58 but rebounded at the close to $87.75, up 0.9%. Independent oil and gas producer Devon Energy (DVN, news, msgs) added 1.2% to $103.97.

The Nasdaq was hurt by weakness in such key stocks as Apple (AAPL, news, msgs), down 2.6% to $121.73, Google (GOOG, news, msgs), down 3% to $457.02, and Microsoft (MSFT, news, msgs), down 0.8% to $26.99. (Microsoft is the publisher of MSN Money.)

Sixteen of the 30 Dow stocks were higher today, led by Alcoa (AA, news, msgs), up 3.2% to $38.32. The stock rallied after the company said it had combined its wheel products and its auto and truck business into a single unit.

At the same time, 276 S&P 500 stocks rose on the day, along with 51 stocks in the Nasdaq-100 Index ($NDX.X). The index, however, was down 12 points to 1,733.

For those depressed about the declines the stock market has suffered in the first two months of the year, there was a bit of good news today. The U.S. stock market basically held its own after Friday's big sell-off that saw the Dow fall 315 points and losses in Asia and Europe.

The Nikkei 225 Index ($N225) in Japan fell 661 points, or 4.5%, to 12,992. Hong Kong's Hang Seng Index ($HSIX) slid 3% to 23,585. European markets were down about 1%.

• Top Stocks blog: A crummy 2 months for stocks

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$102.45	$101.84	$0.61	0.60%	6.74%
Heating oil (per gallon)	$2.8408	$2.8069	$0.0339	0.04%	7.22%
Natural gas (per million BTU)	$9.3460	$9.3660	-$0.0200	-0.37%	24.90%
Unleaded gasoline (per gallon)	$2.6720	$2.6699	$0.0021	6.36%	7.27%

Intel trims profit margin; shares fall

Late today, chip giant and Dow component Intel (INTC, news, msgs) said it was trimming its gross margin forecast for the first quarter due to lower-than-expected prices for NAND flash memory chips.

Shares fell 2.3% to $19.55 in after-hours trading and may pressure markets on Tuesday. The stock had risen 4 cents to $20.01 in regular trading.

The chipmaker says all its other financial projections remain the same.

For the quarter ending in March, Intel expects gross margins of 54%, plus or minus a point. The company previously expected a gross margin of 56%, plus or minus a point.

NAND chips are used in MP3 players, cameras, USB flash drivers and cell phones.

Why Apple and Google fell

Apple shares were down as much as 5.6% to $118 this afternoon before the late-day rally pulled the stock up to $121.73.

Investors sold the stock after two analysts cut their price targets. RBC Capital Markets analyst Mike Abramsky lowered his price target on Apple to $175 a share from $200, and Banc of America analyst Scott Craig cut his target on Apple's stock to $160 a share from $180.

The downgrades came a day before Apple is to hold its annual meeting at its Cupertino, Calif., headquarters.

Craig lowered his sales estimates for Apple's iPod music player and the iPhone for the current quarter and cut his iPod unit forecast for Apple's fiscal year, which ends in September. In a note to clients, he also said he doesn't believe Apple will meet its target of 10 million iPhones sold for all of 2008.

In the note, Craig said most of his decisions were based on "recent production data points from Asia" and continued U.S. consumer weakness.

Abramsky left an "outperform" rating on the stock. Craig still has a "buy" rating on Apple.

Google, whose shares are down 38% from their Nov. 7 high, suffered when Piper Jaffray analyst Aaron Kessler changed his view on the Internet sector from "positive" to "neutral." He cited rising indications that Internet companies' estimates will be at risk this year.

Kessler doesn't see any near-term sector catalysts and said he'd look for "signs of stabilization in fundamentals" before becoming more optimistic on the sector.

Boeing holds the Dow back

For most of the day, Boeing was the weak link among the 30 Dow stocks after the Air Force announced late Friday that it had chosen Northrop Grumman and European Aeronautic Defence & Space (FR:EAD, news, msgs), the parent company of Airbus, for a $35 billion deal to provide 179 refueling tankers.

With the late-day rally, Boeing ended as the second-worst Dow stock after Citigroup.Under the new contract, Northrop Grumman and EADS will replace the Air Force's 500 Stratotankers, many of which have been in service for more than 40 years. The deal could be a major breakthrough for Airbus, opening the door to other contracts with the U.S. military.

Northrop Grumman jumped 5% to $82.57. Earlier today, shares of EADS, the European aerospace conglomerate that owns Airbus, were up 9.2% in trading in Paris.

Analysts had expected the Air Force to continue to choose Boeing, which has supplied tankers to the Air Force for about a half-century.

So what made the Air Force choose Airbus and Northrop? "More."

"More passengers, more cargo, more fuel to offload, more patients that we can carry, more availability and more dependability," Gen. Arthur Lichte said late Friday to reporters.

• Video: Tanker deal sparks outrage

The parts for the KC-45A refueling tankers will be made at an Airbus plant in Mobile, Ala., not in Europe, the winning companies said -- providing 5,000 new jobs for the region.

But that didn't mollify one congressman. "We should have an American tanker built by an American company with American workers," Rep. Todd Tiahrt, R-Kansas, told The Associated Press. Tiahrt's district in Wichita would have benefited from much of Boeing's tanker work, had Boeing won, the AP said.

Buffett says 'the party is over'

Billionaire investor Warren Buffett had some sobering words for investors today.

Buffett's Berkshire Hathaway (BRK.A, news, msgs) will see its profits squeezed. He thinks the U.S. economy is in a recession.

And he didn't think the stock market had become cheap yet. With the S&P 500 at around 1,300, he said on CNBC this morning, the stock market isn't cheap. At least for him. Buffett is a classic value investor who looks to invest in smart, profitable companies whose stocks are low compared with the entire market.

Berkshire Hathaway reported fourth-quarter profit of $2.95 billion, or $1,904 per Class A share, an 18% decline from the $3.58 billion, or $2,323 per share, in the same quarter of 2006. Shares fell 2.5% to $136,500 today.

• Video: Buffett answers CNBC viewer questions

Profit at Berkshire's insurance business fell 46% to $465 million. Berkshire gets about half of its profit from those businesses, which include Geico and National Indemnity Co.

Buffett warned that the insurance business will suffer in 2008.

"That party is over," Buffett wrote in his annual letter to shareholders, which was released after the market close Friday. "It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008. Prices are down, and exposures inexorably rise . . . . So be prepared for lower insurance earnings during the next few years," Buffett wrote.

Buffett also discussed the dismal housing market: "Just about all Americans came to believe that house prices would forever rise. Today, our country is experiencing widespread pain because of that erroneous belief."

Buffett didn't indicate the candidates whom he has chosen to succeed him as chief investment officer but stated that they "all wish to work for Berkshire for reasons that go beyond compensation."

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

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.640%	1.800%	-0.160	-8.89%	-47.77%
5-year Treasury note yield	2.479%	2.509%	-0.030	-1.20%	-28.25%
10-year Treasury note yield	3.534%	3.534%	0.000	0.00%	-12.42%
30-year Treasury bond yield	4.425%	4.420%	0.005	0.11%	-0.76%
Currencies
U.S. Dollar Index	73.720	73.750	-0.030	-0.05%	-3.88%
British pound in dollars	$1.9833	$1.9837	-0.0004	-0.33%	-0.30%
Dollar in British pounds	£0.5042	£0.5041	0.0001	0.34%	0.30%
Euro in dollars	1.5204	1.5207	-0.0002	0.17%	4.03%
Dollar in euros	€ 0.6577	€ 0.6576	0.0001	-0.17%	-3.87%
Dollar in yen	103.52	103.41	0.11	-0.62%	-7.45%
Canadian dollar in U.S. dollars	$1.012	$1.012	$0.0000	-0.31%	1.87%
U.S. dollar in Canadian dollars	$0.989	$0.989	$0.0000	0.21%	-1.82%
Commodities
Gold	$984.20	$975.00	$9.20	0.94%	17.45%
Copper	$3.9285	$3.8550	$0.07	1.30%	29.18%
Silver	$20.1800	$19.9150	$0.27	1.33%	35.25%
Crude oil (NYMEX) (per barrel)	$102.45	$101.84	$0.61	0.60%	6.74%

Dollar falls again as manufacturing weakens

The dollar fell to a three-year low against the Japanese yen in today's session after slumping against the euro last week.

The U.S. dollar index, which measures the currency against a weighted basket of six foreign currencies, fell to 73.24, its lowest level since the index was created in 1973. But the index moved back up to 73.75 this afternoon, down slightly from Friday.

"Risk aversion is clearly the dominant theme in the market, and that's punishing the dollar," Michael Klawitter, a currency analyst in Frankfurt at Dresdner Kleinwort, told Bloomberg News. "We're in an environment of plummeting equities and soaring default protection costs."

Meanwhile, the Institute for Supply Management survey showed a contraction in the manufacturing sector in February. The ISM index fell to a reading of 48.3 last month, down from a reading of 50.7 in January -- but better than economists' expectation for a decline to 47.3.

Readings below 50 indicate contraction in the manufacturing sector, while readings above 50 indicate expansion. The ISM survey showed a reading of 48.4 in December.

Among other economic data due this week, investors will be watching the key February jobs report, due out Friday morning. Economists expect nonfarm payrolls to increase by 35,000 in February after jobs fell by 17,000 in January, the first decline in more than four years.

"Hiring will slow in coming months," Nigel Gault, chief U.S. economist at Global Insight, told Bloomberg News. "The parts of the economy that are doing well aren't enough to offset the parts that are doing badly."

The unemployment situation is a key issue for the Federal Reserve, which has been working to help stimulate the economy with a series of interest-rate cuts over the past five months.

The Fed is expected to lower rates again at its meeting on March 18.

HSBC profit jumps

British bank HSBC (HBC, news, msgs) reported profit of $19.13 billion in 2007, up 21% from the $15.79 billion HSBC earned in 2006. The bank's Asian businesses helped outweigh an ugly picture in the U.S.

Profit from the company's U.S. operations plunged 98% to $91 million, from $4.67 billion in 2006. Charges related to the subprime-mortgage-market meltdown soared 79% to $11.7 billion.

"The economic slowdown and the credit outlook in the U.S. may well get worse before they get better," U.S. Chairman Stephen Green said in a statement.

Shares of HSBC jumped 4.8% to $78.87 on the day in New York.

Thornburg reels from margin calls

Shares of troubled mortgage lender Thornburg Mortgage (TMA, news, msgs) plunged 51% to $4.32 this afternoon after the company said that it has not been able to meet a series of margin calls made since Thursday.

Thornburg said it faces an additional $270 million in margin calls, beyond the $300 million the company had to deal with in February.

Standard & Poor's cut its rating this afternoon on Thornburg "selective default" on the news. Late today, however, the company said it had sold $992 million in securities backed by prime adjustable-rate mortgages.

Standard & Poor's had cut Thornburg's rating to "B-" from "B" on Friday.

United Technologies bids for ATM maker

United Technologies (UTX, news, msgs), maker of Pratt & Whitney jet engines, Otis elevators and Sikorsky aircraft, wants to add another business to the mix.

The company offered $2.63 billion in cash, or $40 per share, for automated-teller-machine manufacturer Diebold (DBD, news, msgs) late Sunday. The offer represents a 66% premium to Diebold's closing price of $24.12 per share Friday afternoon.

Diebold rejected the deal this afternoon as inadequate. It was the second rejection of a takeover offer from United Technologies. The first occurred earlier this month.

Shares of Diebold rocketed 61% to $38.84; shares of United Technologies, a Dow component, fell 1.6% to $69.40.