Crude oil plunges, but Dow falls 42

By Charley Blaine and Elizabeth Strott

The price of crude oil took a big dive today, mostly because traders concluded that Tropical Storm Edouard would cause few problems for the oil and gas platforms and pipelines in the Gulf of Mexico.

But it wasn't enough to keep the stock market from finishing slightly lower on the day as gains in health care and consumer stocks were more than offset by losses in energy and materials stocks.

The Dow Jones industrials finished down 42 points, 0.4%, to 11,284. The Standard & Poor's 500 Index was down 11 points, 0.9%, to 1,249, and the Nasdaq Composite Index fell 25 points, 1.1%, to 2,286.

Oil's fall, despite news of a potential disruption in the Gulf, suggests that crude is headed lower. "A market that can't rally on bullish news is a bear market," Tim Evans, an energy analyst for Citi Futures Perspective, told Bloomberg News.

The market was also held back by trader reluctance to make big bets on stocks and other securities ahead of the Federal Reserve's meeting on interest rates on Tuesday. The Fed is expected to keep its key federal funds rate -- the rate banks charge each other for overnight loans -- at 2%.

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

Tuesday also brings important earnings from Cisco Systems (CSCO, news, msgs), D.R. Horton (DHI, news, msgs) and MGM Mirage (MGM, news, msgs).

Crude fell to as low as $119.50 a barrel in the morning before recovering to a close of $121.41 a barrel in New York, down nearly 3% from Friday.

The tropical storm was moving west across the northern Gulf of Mexico and was expected to come ashore between Galveston, Texas and Lake Charles, La. Weather forecasters said the storm could reach hurricane strength -- 74 miles per hour -- just before moving ashore.

While 74 MPH winds are strong, they are not considered dangerous to oil and gas platforms. In fact, producers have idled less than 1% of oil output and 7.2% of natural gas output in the Gulf because of the storm, the U.S. Minerals Management Service said.

While relief that the storm won’t cause big damage was a big factor pushing energy prices lower, so, too, were persistent reports that hedge funds are selling positions in crude oil as prices have come down.

Data collected by the Commodity Futures Trading Commission last week suggest that there's been more selling by oil market speculators.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$121.41	$125.10	-$3.69	-2.15%	26.50%
Heating oil (per gallon)	$3.3501	$3.4368	-$0.0867	-2.58%	26.45%
Natural gas (per million BTU)	$8.7260	$9.3890	-$0.6630	-4.31%	16.61%
Unleaded gasoline (per gallon)	$3.0002	$3.0843	-$0.0841	-1.57%	20.45%

The Dow's third loss in a row

The Dow's fall on the day -- its third decline in three trading sessions -- was actually a rebound off its intraday low. It had been down as much as 105 points at mid-morning and rebounded to a gain of some 56 points at 2:45 p.m. before sagging again.

But, as crude fell, so did energy stocks. The Amex Oil Index ($XOI.X) was down 3.9% to 1,269. The Philadelphia Oil Service Sector Index ($OSX.X) dropped 5.8% to 290.

Dow component ExxonMobil (XOM, news, msgs) fell 4% to $76.50, the worst performer of the 30 Dow stocks and its lowest close since April 2, 2007. Chevron (CVX, news, msgs) dropped 1.8% to $82.79.

Gas prices were also down. The average price of regular gasoline fell 0.6 cents to $3.881 a gallon, according to the new AAA Fuel Gauge report. Prices have fallen more than 23 cents since gas hit an all-time high of $4.114 per gallon on July 16. Gas is still up more than $1 from a year ago.

Oil's fall was part of a big sell-off in commodities and commodity stocks. Gold fell 1% to $907.90; copper dropped nearly 4% to $3.44 a pound.Freeport-McMoRan Copper & Gold (FCX, news, msgs) was off 11.9% to $80.47. Monsanto (MON, news, msgs) was down 6.8% to $107.02. Fertilizer maker Mosaic (MOS, news, msgs) was down 10.9% to $109.29. Mosaic shares have fallen 32% since mid-June. Mosaic (MOS, news, msgs)

Financial stocks were weaker as well. Goldman Sachs (GS, news, msgs) was off 2.3% to $177.86. Lehman Bros. (LEH, news, msgs) fell 3.8% to $17.94.

Health care was the strongest sector of the market. Pfizer (PFE, news, msgs) was up 2% to $18.98, the top performer among the Dow stocks. Johnson & Johnson (JNJ, news, msgs) added 1.3% to $68.98.

Consumer stocks Coca-Cola (KO, news, msgs), up 1.4% to $53.90, and Procter & Gamble (PG, news, msgs), up 1.3% to $65.82, were the second and third top-performing Dow stocks. Eleven Dow stocks were higher on the day, along with 197 S&P 500 stocks and 35 stocks in the Nasdaq-100 Index($NDX.X). The Nasdaq-100 was off 22 points, or 1.2% to 1,805, with Research In Motion (RIMM, news, msgs), Apple (AAPL, news, msgs) and Qualcomm (QCOM, news, msgs) the biggest drags.

Joy Global (JOYG, news, msgs), which makes mining equipment, was off 9.8% to $64.68.

Merrill's Thain leaves door open for more capital

Merrill Lynch (MER, news, msgs) CEO John Thain said today if the company loses more money, it may have to raise more capital, leaving the door open to further capital raises if markets deteriorate.

Thain has been widely criticized by investors for repeatedly saying the bank was well capitalized over the last eight months, only to raise more capital.

• Video: See Merrill Lynch CEO John Thain's interview on CNBC

Last week, Merrill sold more than $8.55 billion in common shares to boost its capital after selling $30.6 billion in repackaged debt at 22 cents on the dollar. The company financed 75% of the sale.

In a CNBC interview, Thain said that investors misunderstood his prior comments. "When we said we weren't going to raise more capital, we said we were adequately capitalized at that point in time," Thain said. "If we lose more money going forward, we may have to raise more money, and that was always true," he added.

Thain said Merrill should soon return to profitability. The company posted a $4.89 billion quarterly loss last month -- its fourth consecutive quarter of failing to turn a profit.

Merrill shares fell 1.7% to $26.39.

Consumer spending is slowing

Investors got another snapshot of the U.S. economy this morning.

The Commerce Department reported today that consumer spending rose 0.6% in June, better than the 0.4% increase economists had expected. Spending rose 0.8% in May.

But consumer prices rose 0.8% in June, the biggest monthly increase since February 1981. Consumer prices are up 4.1% in the past year.

"The recent moderation in gasoline prices promises at least some relief for beleaguered households, but they must now (make do) without the extra kick from the fiscal stimulus checks. Those checks added a bit more to income in June than we had reckoned -- but much less than they added in May," Nomura Chief Economist David Resler wrote in a note to clients this morning.

Consumer spending makes up about 70% of the U.S. economy.

Personal incomes rose 0.1% in June, also better than the 0.2% decline economists were anticipating. Incomes rose 1.9% in May.

A separate economic report on factory orders showed a 1.7% gain in June, better than the 0.9% increase economists had expected.

Job cuts jump this year

The number of planned job cuts is up 33% so far this year, according to outplacement firm Challenger, Gray & Christmas.

Planned cuts rose 26% in July from June and are up 141% from July of last year.

Financial firms are leading the charge, announcing 100,775 cuts through July -- 50% higher than job cuts for the first seven months of 2007. "Financial firms are just 52,330 job cuts away from breaking last year's record total," John Challenger, the firm's chief executive officer, wrote in a press release.

"Transportation cuts in 2008 have been dominated by airlines, which are reeling from higher fuel prices and (are) cutting flights, amenities and workers to offset their costs," Challenger added. "At the same time, many cash-strapped Americans are increasingly frustrated by higher ticket prices, baggage fees, airport delays and cancelled flights (and) are simply forgoing vacations that require air travel and staying closer to home.

"We have seen job cuts increase in the majority of industries that we track," he said.

Bad debts hit HSBC profit

The U.S. housing slump has hit HSBC (HBC, news, msgs) once again.

This morning, the British bank reported a first-half profit of $7.7 billion, a 29% decline from the $10.9 billion in the same period a year ago.

While the profit results were in line with analysts' forecasts, HSBC said total loan-impairment charges soared 58% to $10.1 billion for the six-month period, mostly because of losses from U.S. mortgages. The bank's U.S. impairment charge rose 85% to $6.8 billion.

HSBC was one of the first major banks to report the ugly impact of the housing mess back in February 2007, when it surprised analysts with a $10.5 billion charge for bad debts in 2006 -- much higher than had been expected.

Today's news drove HSBC shares in New York down 1.9% to $81.46.

'Challenging' environment for economy

HSBC issued a cautious outlook, allowing for the possibility that the mortgage mess could get worse.

"The outlook for the near term remains highly challenging with significant uncertainty," Chairman Stephen Green said in a statement this morning. "Globally, consumer confidence is declining, and despite the short-term success of the recent fiscal stimulus, the U.S. economy continues to be weak, driven by continuing housing market difficulties."

"Ultimately, the real economy will recover from this crisis, although it may get worse before it gets better," Green added.

Economy still a concern for Fed

The slowing economy has been a major concern for the Federal Reserve, prompting the central bank to make a series of interest rate cuts since last September. At the Federal Open Market Committee meeting Tuesday, the Fed will likely keep rates on hold at 2%, but the central bank has to figure out how to balance the risk of inflation against the risk of further weakness in the economy.

"Unacceptably high headline inflation has heightened the FOMC's concerns about inflation, but continuing strains in the financial markets and evidence of spreading economic softness will force the FOMC to toe a fine line between the two risks," David Resler, chief economist at Nomura Securities, wrote in a note to clients. "We expect the FOMC to keep the funds rate target set at 2% and anticipate no meaningful change in its assessment of the balance of risks."

ImClone calls bid too low

ImClone (IMCL, news, msgs) wants more money from Bristol-Myers Squibb (BMY, news, msgs).

The $60-per-share offer Bristol-Myers made for the biotech company last week "substantially undervalues ImClone," the company said in a statement today. ImClone also said that it formed a committee to study the matter and that its board has been discussing possible plans to separate its Erbitux business from its pipeline business.

Billionaire investor Carl Icahn, who is chairman of ImClone, also criticized Bristol-Myers' offer.

Bristol-Myers partners with ImClone on the cancer drug Erbitux, which had $1.3 billion in sales last year. Bristol-Myers already owns about 17% of ImClone.

ImClone shares were down 0.5% to $65.03; Bristol-Myers shares were up 1.3% to $21.39 today.

Chrysler funding falls short

The U.S. automakers just can't get a break. With General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) reporting dismal quarterly results and all three struggling with sales, Chrysler on Sunday said it was unable to renew all of its $30 billion in short-term debt.

Chrysler Financial, the automaker's financing arm, said it renewed $24 billion to fund the company's dealers and its financial-services business. Chrysler reduced the amount of funding because of "conditions in the credit markets and changes in the company's retail strategy," the company said in a press release.

Chrysler is majority-owned by private-equity firm Cerberus Capital Management.

In late July, Chrysler Financial said it would stop offering leases starting Aug. 1. Leases have made up about 20% of the automaker's business.

GM closed down 1.3% to $10.10; Ford rose 3.4% to $4.81.

Disney charges more to see Mickey

Planning a vacation to Walt Disney's (DIS, news, msgs) theme parks? It's going to cost you more.

The entertainment company said late Friday that prices for one-day tickets for kids 10 years old and up will rise to $75 from $71. The price of tickets for children ages 3 to 9 will increase by $3 to $63. The price hikes went into effect Sunday.

Disney shares rose 1% to $30.37.

Yahoo critic wants board vote examined

Yahoo's (YHOO, news, msgs) board of directors are safely in their positions for another year, but the stock was moving lower today. The stock fell 2.1% to $19.38; it has been trading under $20 since Thursday, the day before the company held its annual meeting in San Jose.The stock briefly hit $19.21 this morning, just three cents above $19.18, its close on Jan. 31, the day before Microsoft first disclosed its offer.

The stock has fallen 35% since peaking at $29.98 on Feb. 14, in the immediate aftermath of Microsoft's (MSFT, news, msgs) offer to buy the company. (Microsoft is the publisher of MSN Money.)

Chief Executive Officer Jerry Yang won 85% of the shares cast at the meeting on Friday, but his support shrank from more than 90% a year ago. Yang and Chairman Roy Bostock have faced intense criticism in the past six months over the handling of Microsoft's offer.

But late today, The Wall Street Journal said that Capital Research Global Investors, controlled by fund manager Gordon Crawford, has asked for an examination of Friday's shareholder vote, suggesting that more opposition to Yang should have been recorded.

Capital Research, which owns at least 7% of Yahoo, and Capital World Investors, a related fund which controls about 10% of Yahoo's stock, had advised its funds to withhold votes for Yang to renew his position on the company's board, the people familiar with the matter said.

In a statement late today, Yahoo said, "The independent inspector of elections certified the results of the election and Yahoo accurately announced those results."

Crawford has been a high-profile critic for months. That his fund recommended that shareholders withhold votes for Yang suggests that the anger has yet to subside.

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

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.660%	1.630%	0.030	1.53%	-47.13%
5-year Treasury note yield	3.254%	3.228%	0.026	-0.37%	-5.82%
10-year Treasury note yield	3.972%	3.948%	0.024	-0.18%	-1.56%
30-year Treasury bond yield	4.589%	4.569%	0.020	-0.30%	2.92%
Currencies
U.S. Dollar Index	73.620	73.420	0.200	0.27%	-4.01%
British pound in dollars	$1.9616	$1.9627	-0.0012	-1.08%	-1.39%
Dollar in British pounds	£0.5098	£0.5095	0.0003	1.09%	1.41%
Euro in dollars	$1.5586	$1.5586	0.0000	-0.09%	6.64%
Dollar in euros	€ 0.6416	€ 0.6416	0.0000	0.09%	-6.23%
Dollar in yen	108.18	107.63	0.55	0.28%	-3.28%
Canadian dollar in U.S. dollars	$0.966	$0.974	-$0.0084	-1.16%	-2.71%
U.S. dollar in Canadian dollars	$1.036	$1.026	$0.0093	1.21%	2.75%
Commodities
Gold	$907.90	$917.50	-$9.60	-1.60%	8.34%
Copper	$3.4400	$3.5785	-$0.14	-6.05%	13.12%
Silver	$17.1400	$17.5200	-$0.38	-3.65%	14.88%
Corn	$5.3550	$5.6500	-$0.30	-8.85%	17.56%
Crude oil (NYMEX) (per barrel)	$121.41	$125.10	-$3.69	-2.15%	26.50%