Oil falls back; stocks break even

By Charley Blaine and Elizabeth Strott

Stocks finished basically even today as a sizable rally in financial and technology shares offset weakness in such issues as Coca-Cola, Verizon Communications and AT&T.

At the same time, the market benefitted from a pullback in oil prices from a new intraday high. Crude closed at $134.61 a barrel, down 25 cents on the day, after hitting $139.89 during the day. Energy shares, however, moved higher.

The Dow Jones industrials closed down 38 points to 12,269. The Standard & Poor's 500 Index was up slightly to 1,360. And the Nasdaq Composite Index was up 20 points, or 0.8%, to 2,475.

Only 11 of the 30 Dow stocks were higher, led by Bank of America (BAC, news, msgs) with a 1.8% gain to $30.32, followed by Citigroup (C, news, msgs), up 1.7% to $20.83. General Electric (GE, news, msgs) hit a four-and-a-half year low after a downgrade.

Meanwhile, 274 of the S&P 500's stocks had gains, led by video game retailer GameStop (GME, news, msgs), up 7.7% to $47.94 on an upgrade, and MGIC Investment (MTG, news, msgs), up 6.4% to $10.48, Zions Bancorp (ZION, news, msgs), up 6.35% to $37.16 after getting drubbed last week.

Financials moved higher after American International Group (AIG, news, msgs) ousted its chief executive and Lehman Bros. (LEH, news, msgs) said it had cut its mortgage-related holdings by 20% in the second quarter to limit the damage from problems in the credit markets. While AIG was down 0.5% to $34.01, Lehman Bros. was up 5.4% to $27.20.

Verizon Communications (VZ, news, msgs) and AT&T (T, news, msgs) were among the Dow's biggest laggards after both were downgraded on concerns about the weak economy and increasing mobile phone competition. Verizon fell 2.9% to $36.24; AT&T fell 1.4% to $36.17.

Coca-Cola (KO, news, msgs) and PepsiCo (PEP, news, msgs) both dropped 2.2% -- to $54.18 and $66.04, respectively. They were pushed lower on investor concern that the damage from floods in the Midwest mean they will pay more for sweeteners for their soft drinks.

The Nasdaq moved higher because of rallies in such key stocks as Apple (AAPL, news, msgs) and Research In Motion (RIMM, news, msgs). Apple moved up 2.6% to $176.84. It had been lower in the last week because of worries about the health of CEO Steve Jobs. The concern erupted a week ago when a clearly gaunt Jobs introduced a new version of Apple's iPhone at a San Francisco event. Jobs has had cancer before.

Research In Motion was up 6% to $140.98 on optimism about its first-quarter earnings report, due next week. One analyst suggested the stock could hit $200. The two stocks alone were worth nearly 12 points to the Nasdaq-100 Index ($NDX.X), which closed up 19 points, or 1%, to 1,985.

The market will probably react early tomorrow to two events: Goldman Sachs' (GS, news, msgs) second-quarter earnings report, due before the market open, and the Commerce Department's monthly report on housing starts and building permits.

Wall Street expects a decent report from Goldman; the stock was up 2.2% to $182.09. The street expects a 3% to 5% decline in housing starts to an annualized 1 million units.

Also, the Labor Department will release its monthly Producer Price Index in the morning.

Calloway runs up on U.S. Open mania

Rocco Mediate may have come up just short against Tiger Woods in sudden death at the U.S. Open golf tournament today, but his sponsor was a winner.

Calloway Golf (ELY, news, msgs) sponsors Mediate on the PGA tour, and shares moved higher all afternoon, finishing up 3% to $12.66 as it appeared Mediate might beat Woods in the 18-hole playoff.

But Woods made a birdie on the 18th hole, forcing the playoff to sudden-death, the first since 1994. Woods won in the first sudden-death hole. Calloway was 1.3% lower at $12.50 in after-hours trading.

Shares of Woods' sponsor Nike (NKE, news, msgs) were lower all day long, finishing down 0.9% to $68.38. Shares were off an additional 0.3% to $68.20 in after-hours trading.

Crude's fall gives stocks an opening

Crude oil finished lower after reaching its intraday record in New York, breaking the previous high of $139.12. The catalyst was a fire that cut output from Norway's North Sea fields.

The Dow fell as much as 95 points on that news but rebounded as crude fell back on profit-taking and the news that Saudi Arabia was increasing its production by 200,000 barrels a day starting in July in a bid to get crude prices down to more realistic levels.

The Saudi increase report came amid growing pressure for more oil from the Organization of the Petroleum Exporting Countries cartel, which pumps about 40% of world output.

Some wondered if crude prices are near a peak. "When you put in a new record and fail to see any follow-through, it suggests that there is some underlying weakness in the market," Michael Fitzpatrick at MF Global told Bloomberg.

The Saudi production increase would mark the highest monthly rate since August 1981, said Kevin Norrish at Barclays Capital. But, he said, the move may not do much for consumers because global supplies are so tight already.

Energy stocks moved higher today despite oil's pullback. Royal Dutch Shell (RDS.A, news, msgs) rose 1.6% to $80.99. Anadarko Petroleum (APC, news, msgs) was up 0.5% to $77.69. Chevron (CVX, news, msgs) added 0.1% to $99.49.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$134.61	$134.86	-$0.25	5.70%	40.25%
Heating oil (per gallon)	$3.8274	$3.8368	-$0.0094	4.38%	44.46%
Natural gas (per million BTU)	$12.9330	$12.6250	$0.3080	10.51%	72.83%
Unleaded gasoline (per gallon)	$3.4379	$3.4626	-$0.0247	2.68%	38.02%

AIG shares slip after Sullivan ouster

AIG shares didn't get any traction after the company said Martin Sullivan is stepping down as chief executive officer amid shareholder pressure. Big shareholders, including billionaire investor Eli Broad and Legg Mason (LM, news, msgs) fund manager Bill Miller, had written letters to AIG's board, pushing the company to make changes to its leadership.

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AIG has lost a total of $13 billion in the past two quarters, and the stock has plunged 52% in the past year.

Sullivan, 53, will be replaced by current Chairman Robert Willumstad. Sullivan had worked at AIG since he was 17; in 2005, he replaced former CEO Hank Greenberg, who had run AIG for more than 40 years.

Willumstad said this morning that the "difficult period is not over" and that "nothing is off the table." He said he will conduct a "thorough strategic and operational review of AIG's businesses and their performance," concluding the process in the next 60 to 90 days, with an investor meeting to be held after Labor Day.

Lehman thinks it can survive its big loss

As expected, Lehman officially reported its second-quarter results today of a $2.8 billion loss, or $5.14 per share, after pre-announcing the results last week. It was the company's first quarterly loss since going public in 1994.

And the stock moved higher as investors cheered by comments from CEO Dick Fuld.

Lehman said fixed-income revenue was negative $3 billion, and capital markets net revenue fell to negative $2.4 billion.

Lehman said it has liquidity reserves of $45 billion, a 32% increase from the first quarter, and its leverage ratio (a measure of debt to equity) fell to 24.3 from 31.7 from the previous quarter. The lower number indicates that the company has taken measures to reduce the debt on its books. Lehman also said it reduced its mortgage holdings by 20% in the quarter.

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"This is my responsibility," Fuld said on a conference call with analysts. The loss was "totally unacceptable" and, "in hindsight," caused by poor choices by Lehman, he said.

Lehman has lost 60% of its value since the beginning of the year.

GE gets downgraded

General Electric shares were down slightly this afternoon after JPMorgan Chase cut the stock to "neutral" from "overweight." The stock closed down 0.6% to $28.97, its lowest close since Nov. 28, 2003. Volume of 87 million shares was five times its average.

Analyst Stephen Tusa said GE, a Dow component, would likely be hit by slower economic growth, which would in turn hurt the company's earnings.

Tusa lowered his 2009 earnings forecast to $2.30 per share from $2.42.

GE's NBC Universal division could face weaker advertising sales, Tusa said, and the company's aviation unit would suffer from the recent capacity cuts announced by several U.S. airlines.

Chiquita: Yes, we have fewer bananas

Shares of Chiquita Brands International (CQB, news, msgs) plunged nearly 29% to $16.65 after the company said it will report a third-quarter loss.

The fruit producer said it expects a "significant loss" next quarter and a challenging second half of the year because of high costs for fuel and fertilizers. Banana volumes are flat to down, the company said, hurt by bad weather in Central America and Ecuador.

Analysts are expecting third-quarter earnings of $1.07 per share.

Corn soars after floods

If you think the price of hamburger or bacon is high now, just wait.

Corn for December delivery hit a record $7.915 a bushel after the Midwest suffered massive flooding, which could cause "hundreds of millions of dollars" in damage, according to the National Weather Service. December corn closed at $7.65 a bushel, up 25.5 cents from Friday. Corn for July delivery was 22.75 cents a bushel to $7.3175.

"We know there's going to be less of a crop now than there could have been months ago," Jim Fawcett, crop specialist at Iowa State University, told The New York Times. "There will be some fields where there's no crop. If the flooding continues, we won't have any growing season to work with. For corn, time has run out."

The poor weather could push grain prices higher, in turn sending food prices up by 9% through 2012, Bill Lapp, an economist at consulting firm Advanced Economic Solutions, told The Wall Street Journal.

Corn prices have soared 85% over the past year.

Because corn is so critical in raising cattle, pigs, chickens and other livestock, farmers may start liquidating herds to cope with higher costs. That could well push meat costs sharply higher in the fall.

The U.S. Department of Agriculture last week cautioned that corn stockpiles could decline by 53% after this year's growing season, to the lowest level since 1995.

Tyson Foods (TSN, news, msgs) fell 1.5% to $14.74 today and was off an additional 0.5% to $14.67 in after-hours trading. Corn was a factor. The company also said it had shut down two pork processing plants because of the flooding.

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

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.940%	1.930%	0.010	4.86%	-38.22%
5-year Treasury note yield	3.719%	3.728%	-0.009	9.16%	7.64%
10-year Treasury note yield	4.245%	4.261%	-0.016	4.92%	5.20%
30-year Treasury bond yield	4.780%	4.802%	-0.022	1.55%	7.20%
Currencies
U.S. Dollar Index	73.685	74.170	-0.485	1.01%	-3.92%
British pound in dollars	$1.9635	$1.9478	0.0157	-1.00%	-1.30%
Dollar in British pounds	£0.5093	£0.5134	-0.0041	1.01%	1.31%
Euro in dollars	$1.5480	$1.5411	0.0069	-0.51%	5.91%
Dollar in euros	€ 0.6460	€ 0.6489	-0.0029	0.51%	-5.58%
Dollar in yen	108.20	108.04	0.16	1.71%	-3.26%
Canadian dollar in U.S. dollars	$0.976	$0.973	$0.0039	-3.04%	-1.66%
U.S. dollar in Canadian dollars	$1.025	$1.029	-$0.0040	3.15%	1.70%
Commodities
Gold	$886.30	$873.10	$13.20	-0.11%	5.76%
Copper	$3.6640	$3.5910	$0.07	1.61%	20.49%
Silver	$17.2320	$16.5600	$0.67	2.18%	15.50%
Corn	$7.3850	$7.3175	$0.07	23.24%	62.13%
Crude oil (NYMEX) (per barrel)	$134.61	$134.86	-$0.25	5.70%	40.25%