Stocks break even, and that's a win

By Charley Blaine and Elizabeth Strott

For bulls, today was a maddening victory.

Traders began the day knowing that markets in Asia fell sharply and European markets also had fallen back. And many said saber rattling about inflation by Federal Reserve Chairman Ben Bernanke late Monday boosted the dollar but led to a weak open for stocks.

Despite all that, the market held its own but not cheerfully.

The Dow Jones industrials closed higher -- but gained only 9 points, closing at 12,290. The Standard & Poor's 500 Index finished down 3 points at 1,358.

And the Nasdaq Composite Index was off 11 points to 2,449, despite a 2.2% gain to $185.64 for Apple (AAPL, news, msgs) and smaller gains for Microsoft (MSFT, news, msgs), Qualcomm (QCOM, news, msgs), Starbucks (SBUX, news, msgs) and Research In Motion (RIMM, news, msgs). (Microsoft is the publisher of MSN Money.)

Financial stocks had a modest rally, with some exceptions, but crude oil fell to $131.31 a barrel and dragged down energy stocks.

Thirteen of the 30 Dow stocks were higher on the day. But only 227 S&P 500 stocks had gains, along with just 22 stocks in the Nasdaq-100 Index ($NDX.X). The index closed down 7 points to 1,973, its third-straight loss.

Technical analysts were pleased that buying kicked in when the S&P 500 hit 1,350 and climbed higher. The 1,350 level represented a 50% decline from the difference between the index's March 17 low and May 19 high. Bouncing off that level offered a little confidence.

Several problems face the market for now:

• Higher oil prices. While oil was lower, there is a still lot of betting it's heading higher. Saudi Arabia wants to hold a meeting between consuming nations and production nations, but few think much will come of it.

• Very weak financial stocks. Yes, the S&P Banking Index ($BIX.X) was up 1.7% to 202 today, and the Amex Securities Broker/Dealer Index ($XBD.X) was up slightly to 159. But there's huge skepticism that the nation's financial companies have finally hit bottom. Today was simply a day when financial stocks rallied, CNBC's Bob Pisani said. Don't read anything else into it.

Crude oil's fall hit energy stocks. The Amex Oil Index ($XOI.X) was down 2.6% to 1,531. ExxonMobil (XOM, news, msgs) and Chevron (CVX, news, msgs) were the worst performers among the 30 Dow stocks, falling 1.3% to $87.89 and 2.4% to $98.78, respectively.

On Wednesday, investors will pay close attention to the weekly oil and gas inventory report from the Energy Department. Of particular interest will be whether the data on gasoline supplies show that American drivers are cutting back on their fuel consumption.

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Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$131.31	$134.35	-$3.04	3.11%	36.81%
Heating oil (per gallon)	$3.8124	$3.8770	-$0.0646	3.97%	43.90%
Natural gas (per million BTU)	$12.4350	$12.6040	-$0.1690	6.25%	66.18%
Unleaded gasoline (per gallon)	$3.3193	$3.3940	-$0.0747	-0.86%	33.26%

Lehman still faces stresses

While financial stocks were higher (Citigroup, American International Group (AIG, news, msgs) and JPMorgan Chase (JPM, news, msgs) were among the top five Dow performers), Lehman Bros. (LEH, news, msgs) was down 6.7% to $27.50. Several investment houses cut earnings estimates for the company.

Lehman said Monday it expected to lose $2.8 billion for its second quarter. It also sold 143 million common shares for $28 a share, or $4 billion, and $2 billion of preferred stock that automatically converts to common shares in three years.

Oppenheimer analyst Meredith Whitney -- among the most bearish financial industry analysts -- said the "sheer size of such a dilutive capital raise will put serious pressure on the bank's ability to deliver on meaningful earnings-per-share growth over the near to medium term."

Bernanke gives the market some jitters

Fed Chairman Bernanke believes the economy has probably passed through the worst of the downturn. Now, the problem is the renewed inflation caused by high energy prices.

The central bank, he told the Federal Reserve Bank of Boston's annual economic conference late Monday, will "strongly resist" any surge in inflationary pressure. With his comments, Bernanke again signaled -- as he has in recent weeks -- that the Fed is done lowering interest rates.

Bernanke's remarks were market moving. They led to the lower open for stocks and pushed interest rates higher; the yield on the 10-year Treasury note jumped to 4.10% from 3.99% Monday. The dollar rose 1% against the euro, British pound and yen. Gold dropped $26.90 or 3% to $871.20 an ounce. Silver fell 3.3% to $16.635 an ounce.

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Bernanke said that the Fed's rate-cutting and moves to inject liquidity into the credit system should offset the headwinds that still face the economy." So far, he said, the surge in commodities prices and raw materials costs has had "limited" effects on the prices of products in the U.S., thanks in part to weakening domestic demand.

Bernanke said that the jump in the unemployment rate in May -- to 5.5% from 5.0% -- hasn't changed the Fed's outlook on the economy and interest rates.

The Fed lowered its key federal funds rate from 5.25% to 2% between September 2007 and April, hoping to combat the threat of recession stemming from the mortgage meltdown. Most economists now expect that the central bank will keep the federal funds rate steady at 2% when it meets at the end of June.

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USDA cuts corn crop estimate

The price of corn was pushing higher today after the Agriculture Department said bad weather in the Midwest will likely hurt this year's corn crop. That means prices could go even higher.

Corn was at $6.7325 a bushel this afternoon in Chicago, up 16 cents, or 2.4%, from Monday. So far this year, corn is up 48%.

The Midwest has been hit by heavy rains in the last week, causing major flooding in Iowa, Illinois, Wisconsin, Indiana and Ohio.

The Agriculture Department cut its estimate for the 2008 corn harvest by 10% to 11.7 billion bushels. It also cut its forecast for corn supplies to 673 million bushels for the 2008-09 season. That would be the lowest since 1996.

Last month the USDA forecast corn stocks of 763 million bushels, but recent wet weather has prevented many farmers from planting their crops.

Corn is the biggest crop in the U.S. Farmers planted 92.9 million acres of corn in 2007 -- the most since 1944 -- producing a value of $52.1 billion.

IEA cuts energy demand outlook

Crude oil fell today in part because of the rising dollar. Another big factor: The International Energy Agency this morning lowered its forecast for global oil demand this year because of record high prices.

The IEA cut its 2008 forecast to 86.77 million barrels a day from last month's forecast of 86.84 million barrels a day.

"The current oil price rally could impinge upon growth prospects," the report said. "Globally, the high oil price is contributing to inflationary pressures."

The World Bank this morning lowered its global economic growth forecast to 2.7% in 2008, from 3.7% last year. The bank's Global Development Finance report said "inflationary pressures are becoming more and more of a problem," and the risks posed by rising oil prices are "much more serious than before."

In January, the World Bank had predicted global growth of 3.3% this year.

XTO Energy to buy Hunt

XTO Energy (XTO, news, msgs) this morning said it will purchase the oil and natural gas producer Hunt Petroleum for $4.2 billion in cash and stock.

XTO said the move to buy the closely held Hunt was partly due to the "current outlook for commodity prices." The deal would add 1.052 trillion cubic feet of natural gas equivalent, XTO said.

After the expected closing date of Sept. 3, XTO would gain Hunt's daily production of 197 million cubic feet of natural gas, 8,500 barrels of oil and 2,300 barrels of natural gas liquids.

Shares of XTO fell 1% to $67.02 on the news.

Hunt Petroleum is owned by the heirs of the Hunt family of Texas. The 83-year-old company was founded by the late H.L. Hunt and was owned by two Hunt family trusts.

Directors of Hunt and two related companies began seeking a buyer late last year with the help of Goldman Sachs, XTO said. Hunt heirs were embroiled in a fight over the trusts that owned Hunt Petroleum after the founder's eldest daughter, Margaret Hunt Hill, died last year, the Dallas Morning News reported in February.

More bad mortgage bets at UBS?

The Wall Street Journal reported today that Swiss bank UBS (UBS, news, msgs) may write down further losses on mortgage-backed securities, as prices for the securities have declined substantially in recent weeks.

Lehman Bros.' worse-than-expected second-quarter loss and its related plan to raise capital are "clearly indicative of further write-downs for UBS," Peter Thorne, of brokerage Helvea in London, told The Journal. "The deterioration in AAA-rated securities and the U.K. mortgage market" are adding to the pressure, Thorne said.

UBS is expected to announce on Friday the results of a $15.67 billion move to raise capital in a rights issue, the paper reported. (A rights offer gives existing shareholders the right to buy a specified amount of new shares.) That effort is expected to succeed. But some top UBS executives have been selling their rights to buy shares, the report said -- an indication they lack confidence.

UBS shares rose 1.5% to $23.45.

UBS will report second-quarter results on Aug. 12.

Apple shares move higher on new iPhone

Apple shares moved higher as investors and analysts appeared to be getting more excited about the prospects for the new version of its iPhone.

Citigroup, which has a "buy" rating on the stock, raised its price target to $287 from $248, while Lehman Brothers raised its price target to $234 from $202 and kept its "overweight" rating.

Standard & Poor's Equity Research Services raised Apple to "buy" from "hold" and boosted its price target on the stock to $210 from $200.

The newest version of the gadget will start at $199, much less than the first-generation iPhones, which cost between $399 and $499.

The new 3G iPhone is a little thinner and will run on 3G networks, allowing users to download and use the Internet faster. The new device will also support Microsoft's Exchange message system, the most popular system among corporate e-mail users.

Since introducing the iPhone in late June of last year, Apple has sold 6 million of the devices and has secured the No. 2 spot in the smart-phone market, behind Research In Motion's (RIMM, news, msgs) BlackBerry.

The new phone will be available in 22 countries starting July 11.

Texas Instruments narrows forecast

Chip maker Texas Instruments (TXN, news, msgs) late Monday narrowed the range of its second-quarter earnings forecast.

TI said it expects to earn between 43 and 47 cents per share in the second quarter. In April the company had forecast between 42 and 48 cents, explaining that a weak economy and slowing demand were hurting the chip market.

Revenue will be between $3.33 billion and $3.46 billion, the company said. Analysts are looking for earnings of 46 cents per share on $3.37 billion in revenue.

Shares fell 2.9% to $30.42.

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

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.970%	1.850%	0.120	6.49%	-37.26%
5-year Treasury note yield	3.541%	3.388%	0.153	3.93%	2.49%
10-year Treasury note yield	4.099%	3.992%	0.107	1.31%	1.59%
30-year Treasury bond yield	4.701%	4.621%	0.080	-0.13%	5.43%
Currencies
U.S. Dollar Index	73.740	72.875	0.865	1.08%	-3.85%
British pound in dollars	$1.9558	$1.9747	-0.0189	-1.39%	-1.68%
Dollar in British pounds	£0.5113	£0.5064	0.0049	1.41%	1.71%
Euro in dollars	$1.5475	$1.5647	-0.0172	-0.54%	5.88%
Dollar in euros	€ 0.6462	€ 0.6391	0.0071	0.54%	-5.55%
Dollar in yen	107.37	106.27	1.10	0.93%	-4.01%
Canadian dollar in U.S. dollars	$0.979	$0.978	$0.0002	-2.82%	-1.44%
U.S. dollar in Canadian dollars	$1.023	$1.022	$0.0006	2.92%	1.47%
Commodities
Gold	$871.20	$898.10	-$26.90	-1.81%	3.96%
Copper	$3.5600	$3.6130	-$0.05	-1.28%	17.07%
Silver	$16.6350	$17.2100	-$0.57	-1.36%	11.49%
Corn	$6.7325	$6.5725	$0.16	12.35%	47.80%
Crude oil (NYMEX) (per barrel)	$131.31	$134.35	-$3.04	3.11%	36.81%