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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.705321 |
| Euro to US Dollar | 1.341382 |
| Japanese Yen to US Dollar | 0.009962 |
| Canadian Dollar to US Dollar | 0.850702 |
A rally for stocks fizzled this afternoon as financials weakened, offsetting gains for energy stocks amid record highs for crude oil.
The finish typified June for the stock market: Financial stocks were clobbered, especially Lehman Bros. (LEH, news, msgs), which was off 11% on the day. Energy shares could do no wrong. And it left the stock market still flirting with bear-market-like losses.
The Dow Jones industrials, once up as many as 91 points, finished with a 4-point gain to 11,350. The Standard & Poor's 500 Index was up 2 points to 1,280. And the Nasdaq Composite Index fell 23 points to 2,293.
Eighteen of the 30 Dow stocks had gains on the day, but more than 270 S&P 500 stocks moved lower. The finish suggests slumping investor confidence, especially considering record-high crude oil and the beginning of the third quarter -- typically the year's weakest.
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Verizon Communications (VZ, news, msgs), up 3.3% to $35.40, was the Dow leader, up 3.7%, in sympathy with a gain 5.7% for Sprint Nextel (S, news, msgs), up 6.6% to $9.50. The company said sales of its Samsung Instinct phone, a competitor to Apple's (AAPL, news, msgs) iphone, have been quite strong.
Crude oil hit a new intraday high of $143.67 a barrel but fell back as the day wore on before finishing at $140 -- its second close above $140 in a row.
Shares of General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) fell back as news circulated that Chrysler Group will shut down some production. GM was down 0.4% to $11.50 on the day, as it continues to trade at levels last seen in the 1950s. Ford was down 3.4% to $4.81.
CNBC said the company would curtail production of minivans at a plant in St. Louis; production would continue at a plant in Windsor, Ont.
There was also a report in the Detroit Free-Press suggesting Cerberus, Chrysler's majority owner, was considering selling or breaking up the company. Last week, Chrysler denied it might seek bankruptcy protection.
- Top Stocks blog: Is the minivan in its death throes?
Lehman shares dive
Lehman Bros. shares fell 11% to $19.81, their lowest close since June 2000. Neither a sale of the fiercely independent Lehman nor more embarrassing write-downs are looming at the investment house, sources told The Wall Street Journal late today.Lehman surprised Wall Street earlier this month with a $2.8-billion quarterly loss and the need to raise $6 billion in fresh capital.
There was additional speculation that the nation's fourth-largest investment bank might be acquired by Britain's Barclays (BCS, news, msgs) at a discount price.
The U.K. bank was said to be interested in buying Lehman at a price lower than it is currently worth. A Lehman spokesman declined comment. A Barclays spokesman could not immediately be reached for comment.
Barclays was off 1.9% to $23.15 in New York.
| Mon. | Fri. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $140.00 | $140.21 | -$0.21 | 9.93% | 45.86% |
| Heating oil (per gallon) | $3.9029 | $3.9066 | -$0.0037 | 6.44% | 47.31% |
| Natural gas (per million BTU) | $13.3530 | $13.1980 | $0.1550 | 14.10% | 78.44% |
| Unleaded gasoline (per gallon) | $3.5015 | $3.5012 | $0.0003 | 4.58% | 40.58% |
Crude oil crushes the market
It was a quiet end to a lousy June and a crummy second quarter. The Dow and S&P 500 suffered losses for a third consecutive quarter; the last time that happened was the third and fourth quarters of 1977 and the first quarter of 1978.The Dow was off 10.2% for the month, its worst June since 1930, and off 7.1% for the quarter, modestly better than its first-quarter loss of 7.6%. Since peaking on Oct. 9, the blue-chip index is down 19.9%; the popular definition of a bear market is a loss of 20%.
The S&P 500 was off 8.6% for the month but only 3.2% for the quarter, a tribute to the power of energy stocks. The energy sector of the S&P 500 moved up nearly 17% in the quarter, nearly offsetting a 19% loss for the financial sector. The S&P 500 is off 18.2% from its all-time high in October.
The Nasdaq was off 9.1% for the month but up 0.6% for the quarter, thanks to relatively strong tech stocks such as Research In Motion (RIMM, news, msgs), up about 5%, Apple, up about 17%, and Google (GOOG, news, msgs), up 19%. From the end of October, the index is off 19.8%.
For the year, the Dow is down 14%, the S&P 500 is down 12.8%, and the Nasdaq is off 13.6%.
All was not gloom. Small- and mid-cap stocks had decent quarters. The Russell 2000 Index ($RUT.X), down 7.8% for the month, was up 0.3% for the quarter. The Standard & Poor's Mid-cap 400 Index ($MID.X) was up 5.1% for the quarter, although down 7.1% for the month.
You can blame the market's poor performance on two factors:
- The price of oil. The stock market has become hostage to oil prices. Crude is up more than 10% in June and 38% in the second quarter alone. AAA and the Oil Price Information Service said the national average retail price of gasoline was $4.086 a gallon today, up slightly from Sunday and 38% from a year ago. Crude's rise to more than $140 has gutted truck sales for major auto makers, including Toyota (TM, news, msgs), and caused such huge losses for airlines that their viability is questions. General Motors is the Dow's biggest loser for the month and the quarter, down 35% and 42%, respectively.
- The disaster of financial stocks. The agony for this sector is now 18 months old because there is such concern about how badly the collapse of the mortgage market has damaged the balance sheets of financial companies. Bank of America (BAC, news, msgs) fell 29.8% for the month, and Citigroup (C, news, msgs) was off 23.4%. Washington Mutual (WM, news, msgs) was off 45% for the month and 56% for the quarter.
While financial stocks, airlines and automakers were the biggest problem areas for the market, they aren't alone. All 30 Dow stocks were lower for the month; no less than General Electric (GE, news, msgs) fell 13% for the month and nearly 28% for the quarter after an embarassing first-quarter earnings miss.
- Top Stocks blog: Should GE fire its CEO?
Chevron (CVX, news, msgs) was the Dow leader, with a tiny loss for the month and was one of just six Dow stocks with gains for the quarter. Chevron's 16% gain was followed by Wal-Mart Stores (WMT, news, msgs), up 6.7%.
GM was the Dow loser for the month (down 32.8%) and the quarter (down 39.6%). GM is the second-worst Dow performer on the year, down 54%, just ahead of American International Group (AIG, news, msgs), down 55%.
Can things get better any time soon? The market is in desperate need of a catalyst. One might come on July 11 when GE reports second-quarter earnings. Analysts now estimate the company will earn 53 cents a share, unchanged from a year ago. If GE beats the estimate, look for a rally.
It will take that kind of a surprise. A look at the charts for the Dow, S&P 500 and Nasdaq suggest a bottom isn't reached. Technical analyst Louise Yamada predicted last week the Dow's bottom would be about 10,000, down 12% from current levels and 30% from last October's highs.
But the bottom is likely more dependent on the dollar and on the price oil.
"Record-high crude prices are a larger danger to the economy than any other factors out there," Windham Financial's Paul Mendelsohn told MarketWatch.
| Index | Today | June chg. | 2nd qtr. chg. | Chg. YTD | Chg. From Oct high* |
|---|---|---|---|---|---|
| Dow Jones Industrial Avg. | 11,350.01 | -10.2% | -7.4% | -14.4% | -19.9% |
| Standard & Poor's 500 Index | 1,280.00 | -8.6% | -3.2% | -12.8% | -18.2% |
| Nasdaq Composite Index | 2,292.98 | -9.1% | 0.6% | -13.5% | -19.8% |
| Dow Jones Transportation Avg. | 4,948.03 | -9.0% | 3.4% | 8.3% | -0.8% |
| Dow Jones Utilities Avg. | 520.85 | -0.2% | 8.7% | -2.2% | -5.8% |
| Standard & Poor's Mid-cap 400 Index | 818.99 | -7.1% | 5.1% | -4.6% | -10.7% |
| Russell 2000 Index | 689.66 | -7.8% | 0.2% | -10.0% | -19.4% |
| Philadelphia Semiconductor Index | 368.16 | -11.3% | 7.0% | -9.8% | -32.6% |
| Standard & Poor's Banking Index | 171.34 | -24.1% | -27.7% | -37.6% | -58.7% |
| Amex Securities Broker/Dealer Index | 145.79 | -13.3% | -5.5% | -29.7% | -45.3% |
| Amex Oil Index | 1,535.39 | -2.2% | 14.8% | -1.6% | 5.3% |
| U.S. Dollar Index | 72.80 | -0.2% | 0.9% | -5.1% | -7.2% |
| Gold per troy ounce | $928.30 | 4.6% | 0.7% | 10.8% | 24.9% |
| Crude oil per barrel | $140.00 | 9.9% | 37.8% | 45.9% | 74.4% |
* Based on Oct. 9, 2007 closes for the Dow and S&P 500 and Oct. 31 closes for Nasdaq. |
Pointing fingers over oil price surge
Oil jumped last week after Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said prices could reach $170 a barrel this summer. Khelil this weekend reiterated that forecast, blaming a weak U.S. dollar."There is more than enough oil in the market to meet the international demand," Khelil said in an interview with Bloomberg News. "The decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices."
One expert agreed that the Federal Reserve and European Central Bank have helped push prices higher.
"We have been quite clear about the foolishness of (Fed Chairman Ben) Bernanke and (ECB President Jean-Claude) Trichet, who seem to be working in concert towards only one goal -- the destruction of the U.S. dollar as a worthy currency and the upward spiral of commodities prices," wrote Cameron Hanover oil analyst Peter Beutel in a daily note to clients. "The most insidious part of their mischief is that they keep tipping their hands. Trichet has not even raised European rates yet, but he has sent oil prices up by at least $15 per barrel just by talking about doing it," Beutel wrote.
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Others blame speculators for driving the prices higher.
"No one can give a forecast to oil," Qatar's oil minister, Abdullah bin Hamad al-Attiyah, told Bloomberg News. Al-Attiyah is in Madrid for the World Petroleum Congress, an energy industry conference. "I'm afraid speculators abuse these forecasts and that boosts the price."
Still others say the high price of oil is a simple matter of supply and demand.
"We are not observing anything approaching sustained growth in physical inventories," Goldman Sachs analysts Jeffrey Currie and David Greely wrote in a note to clients over the weekend. "Current prices are supported by supply and demand fundamentals. The commodity markets are not behaving in a way that a speculative bubble would suggest." If prices were too high relative to supply and demand then there would be an increase in stockpiles of oil, the analysts explained.
H&R Block scores on tax season
Tax-preparation company H&R Block (HRB, news, msgs) had some good news today.The company reported fiscal-fourth-quarter net income of $543.6 million, or $1.66 per share -- far better than the loss of $85.6 million, or 26 cents per share, the company reported in the same period last year. Earnings from continuing operations were $2.11 per share, topping Wall Street's estimate of $2.03 per share.
The company said its retail client base in the U.S. grew 3.8% in the quarter, with international growth rising 6.1%.
The stock rose 2.8% to $21.40.
H&R Block also forecast earnings from continuing operations of $1.60 to $1.70 per share for 2009, above the consensus estimate of $1.57 per share.
Moody's to lower Morgan Stanley
As increases in the price of oil depress the economy, the pressure on troubled financial companies increases. That pressure was evident again this morning.On Friday, ratings company Moody's cautioned that it could cut Morgan Stanley's (MS, news, msgs) credit rating to "A1" from "Aa3."
Stock Charts (Year)
Morgan Stanley
MBIA
Among the risks hurting Morgan Stanley are its commercial-real-estate and leveraged loans businesses, Moody's said.
"The critical issue will be for Morgan Stanley to manage these and other concentrations, and their attendant basis risks, such that any losses are well contained within the revenue capacity of the relevant business area," Moody's said.
Shares of Morgan Stanley were down 1.7% to $36.07on the day.
Separately, Ladenburg Thalmann analyst Dick Bove lowered his 2008 earnings estimate on Morgan Stanley to $4.34 per share from a previous estimate of $4.80 per share.
Fortis, MBIA to raise capital
Belgian-Dutch bank Fortis is getting some help from a Russian billionaire, The Wall Street Journal reported.Billionaire Suleiman Kerimov is investing about $630 million into the company, a week after the bank said it was planning to raise capital to shore up its balance sheet. Kerimov's Millennium Group already owns a 2% stake in Fortis.
Shares of Fortis slumped 20% Thursday, after the bank announced its capital-raising plans.
Bond insurer MBIA (MBI, news, msgs) is also reportedly taking steps to raise capital, according to the paper. MBIA is selling at least $500 million in municipal bonds after being downgraded by Moody's last week.
MIBA said in a press release today that it is not in a "tenuous situation" and that it holds about $1.4 billion in cash.
Dow early in the day, MBIA shares recovered to a gain of 5.3% to $4.39.
| Mon. | Fri. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.705% | 1.630% | 0.075 | -7.84% | -45.70% |
| 5-year Treasury note yield | 3.341% | 3.375% | -0.034 | -1.94% | -3.30% |
| 10-year Treasury note yield | 3.979% | 3.990% | -0.011 | -1.66% | -1.39% |
| 30-year Treasury bond yield | 4.531% | 4.537% | -0.006 | -3.74% | 1.61% |
| Currencies | |||||
| U.S. Dollar Index | 72.800 | 72.670 | 0.130 | -0.21% | -5.08% |
| British pound in dollars | $1.9932 | $1.9952 | -0.0020 | 0.50% | 0.20% |
| Dollar in British pounds | £0.5017 | £0.5012 | 0.0005 | -0.50% | -0.20% |
| Euro in dollars | $1.5751 | $1.5785 | -0.0035 | 1.23% | 7.77% |
| Dollar in euros | € 0.6349 | € 0.6335 | 0.0014 | -1.22% | -7.21% |
| Dollar in yen | 106.19 | 106.17 | 0.02 | -0.18% | -5.06% |
| Canadian dollar in U.S. dollars | $0.980 | $0.990 | -$0.0101 | -2.70% | -1.31% |
| U.S. dollar in Canadian dollars | $1.021 | $1.010 | $0.0109 | 2.76% | 1.32% |
| Commodities | |||||
| Gold | $928.30 | $931.30 | -$3.00 | 4.62% | 10.78% |
| Copper | $3.8825 | $3.8780 | $0.00 | 7.67% | 27.67% |
| Silver | $17.5100 | $17.7100 | -$0.20 | 3.82% | 17.36% |
| Corn | $7.2200 | $7.5475 | -$0.33 | 20.48% | 58.51% |
| Crude oil (NYMEX) (per barrel) | $140.00 | $140.21 | -$0.21 | 9.93% | 45.86% |
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