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| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
One big question on Wall Street is why the stock market hasn't reacted more to the Russian incursion into Georgia.
After all, the market finished Friday and the week little changed, despite lower oil prices and a higher dollar.
A closer look reveals that the conflict is affecting markets already. The Georgian situation is an understated reason for the dollar's gains against the euro and the British pound this week. The slumping European economies were probably a larger catalyst for the greenback's move.
The Dow Jones industrials closed Friday at 11,660, up 44 points; the Standard & Poor's 500 Index was up 5 points to 1,298. The Nasdaq Composite Index was down 1 point to 2,453. For the week, the Dow was down 0.6%, the S&P 500 was unchanged and the Nasdaq was up 1.6%.
The FTSE-100 Index ($GB:UKX) in the United Kingdom and the German Dax Index ($DE:DAX), while little changed Friday, were down for the week.
Tensions with Russia may continue to affect markets in the next few weeks. Poland agreed late Thursday to let the United States put an anti-missile defense system on Polish soil.
A Russian general told a news conference on Friday that the action "cannot go unpunished." The rhetoric is likely to escalate as Russia tries to intimidate its neighbors out of accepting U.S. military support.
The Russian situation is "a watershed event," commodities expert Dennis Gartman of the Gartman Letter told CNBC on Friday. It's causing investors to rethink their positions in Europe. They've been shedding European securities in favor of investment in the States, which means they need dollars.
But the situation is complex. Russia is a huge investor in U.S. securities, particularly bonds of Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs). At the same time, a number of U.S. investment banks have had strong business ties with Russia, as The New York Times noted on Friday (free registration required). Now, they're worried, and one result is that the Russian stock market is down nearly 25% in the last two months.
"We expect some things to be controlled in a directed economy -- the question is the unpredictability," one financial executive told The Times. "Russia has become the largest risk in the financial markets."
The dollar was up 0.8% against the euro and 0.3% against the pound on Friday. It's up about 7% against both since the end of June.
In addition to global tensions, investors will react to reports on wholesale price inflation and housing starts on Tuesday.
While the earnings season is easing, important reports are due from home improvement retailers Lowe's (LOW, news, msgs) and Home Depot (HD, news, msgs) on Monday and Tuesday, respectively.
Home Depot is one of two Dow components reporting next week; the other is Hewlett-Packard (HPQ, news, msgs) on Tuesday.
Also reporting is discount retailer Target (TGT, news, msgs) on Tuesday and BJ's Wholesale (BJ, news, msgs) on Wednesday.
| Close for week | Wk. ago close | % chg. | YTD. chg. | |
|---|---|---|---|---|
| Dow Jones industrials | 11,659.90 | 11,734.32 | -0.63% | -12.10% |
| S&P 500 | 1,298.20 | 1,296.32 | 0.15% | -11.59% |
| Nasdaq Composite | 2,452.52 | 2,414.10 | 1.59% | -7.53% |
| Russell 2000 | 753.37 | 734.30 | 2.60% | -1.65% |
| Crude oil per barrel | $113.77 | $115.20 | -1.24% | 18.54% |
| 10-yr. Treasury yield | 3.85% | 3.95% | -2.48% | -4.54% |
| Gold per troy ounce | $792.10 | $864.80 | -8.41% | -5.48% |
Weakness in techs and energy hold the market back
The dollar's rise and growing concerns about declining U.S. consumption combined to push crude oil lower Friday. Crude closed at $113.77 on the day, down 1.1% from Thursday. For the week, oil was down 1.2%, and it has fallen 22% since peaking on July 11.That hit energy stocks. ExxonMobil (XOM, news, msgs) fell 0.4% to $77.07 and was off 2% on the week. Chevron (CVX, news, msgs) fell 2% to $84.35 and was the worst-performing Dow stock.
The Amex Oil Index ($XOI.X) was down 1.5% to 1,276.
Technology shares, which have given the market a boost in recent weeks, were lower.
IBM Corp. (IBM, news, msgs) was off 0.5% to $126.36.
Apple (AAPL, news, msgs) was down 2% to $175.74, and Research In Motion (RIMM, news, msgs) slipped 1.5% to $128.80.
One reason for the tech weakness: Many large-capitalization companies have been benefitting hugely from a lower dollar, with S&P 500 companies generating roughly half of their sales outside the U.S. If the greenback rises because of slowing economies in Europe and Asia, the value of their foreign profits translated back into dollars actually falls.
The dollar's rise has been a surprise for some analysts: "We thought the combination of a Fed nowhere near hiking rates, persistent financial-system problems and a weak economy would keep the U.S. dollar on its back foot and vulnerable to retest its lows," Morgan Stanley strategist Ned Rumpeltin wrote in a note to clients. But, he added, the markets disagree.
Twenty-two Dow stocks were higher on Friday, with Procter & Gamble (PG, news, msgs), up 2.7% to $71.60, the top performer among the 30 stocks in the blue-chip index. Next was Citigroup (C, news, msgs), up 2.6% to $18.55.
Meawhile, 344 S&P 500 stocks were higher, led by Autodesk (ADSK, news, msgs), the maker of design and engineering software, up 11.7% to $38.37 on better-than-expected second-quarter earnings and a decent outlook for the third quarter.
Autodesk was also the leader among stocks in the Nasdaq-100 Index($NDX.X). The index fell 7 points to 1,958 with 59 stocks showing declines. The index, which tracks large-capitalization Nasdaq stocks, was up 1.6% on the week.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $113.77 | $113.01 | -$1.24 | -8.31% | 18.54% |
| Heating oil (per gallon) | $3.1191 | $3.0991 | $0.0200 | -9.29% | 17.73% |
| Natural gas (per million BTU) | $8.0920 | $8.1360 | -$0.0440 | -11.26% | 8.14% |
| Unleaded gasoline (per gallon) | $2.8602 | $2.9120 | -$0.0518 | -6.16% | 14.83% |
How low will oil slide?
Oil has been pulling back since mid-July. Broad selling has been "based on fresh fears that consumption -- most notably of gasoline -- will continue to fall," Cameron Hanover analyst Peter Beutel wrote in a note to clients this morning.Other commodities also have suffered. Gold fell $22.40, or 2.8%, to $792.10 an ounce Friday; silver dropped a whopping 10% to $12.93 an ounce. Silver has not been below $13 an ounce since last September.
How far oil will fall is now the subject of a lively debate, especially for motorists who faced an average U.S. retail price of $3.771 a gallon on Friday, down slightly from Thursday and down 8.3% from a high of $4.114 a gallon on July 17.
Tony Kolton, the founder and president of Logical Information Machines, a provider of research to most of the world's major energy-trading companies for two decades, thinks crude could drop to $65 a barrel.
"The match has struck, the fuse has been lit, and four or five years from now OPEC producers are going to be drinking their own oil and choking on it," he told MSN Money.
Analysts from Alfa Bank expect the dollar's recent strength to push crude prices back below $100 a barrel. Crude oil is denominated in dollars and generally rises when the dollar declines and vice versa.
Phil Dodge of the Stanford Group told CNBC on Friday that crude could fall below $100 a barrel, possibly to $90.
Penney, Abercrombie offer cautious outlooks
J.C. Penney (JCP, news, msgs) and Abercrombie & Fitch (ANF, news, msgs) reported quarterly profits that beat Wall Street expectations on Friday.But the companies came up short in their earnings forecasts, joining other U.S. retailers who fear a deeper slowdown in consumer spending toward year's end.
Stock Charts (Year)
J.C. Penney
Kohl's
Nordstrom
Kohl's shares rose 7.3% to $51.79 Friday after the discount retailer raised its full-year earnings forecast to between $3.02 and $3.18 per share, up from a previous forecast of $2.95 to $3.15 per share.
Kohl's also reported fiscal-second-quarter profit of $236 million, or 77 cents per share, topping Wall Street's estimate of 73 cents. In the same period last year, Kohl's earned $269.2 million, or 83 cents per share.
"It is extremely important to maintain our existing store base in a tough environment with significant competition for customers whose disposable income is shrinking," Chief Executive Larry Montgomery said on a call with analysts.
Meanwhile, upscale department store chain Nordstrom cut its full-year forecast. Nordstrom said it expects earnings to come in between $2.55 and $2.65 per share, down from previous guidance of between $2.65 and $2.80 per share.
Nordstrom said its fiscal-second-quarter earnings fell to $143 million, or 65 cents per share, down from $180 million, or 71 cents per share, in the same period a year ago. Analysts were expecting 64 cents for the quarter.
Nordstrom stock was up 4.4% to $31.54 Friday.
A better picture for manufacturing?
There are signs that the manufacturing sector in the New York region is improving.The Federal Bank of New York's Empire State index on manufacturing showed a 2.8 reading for August, up from a negative 4.9 in July. Readings above zero indicate expansion, while readings below zero indicate contraction.
More from MSN Money
The Reuters/University of Michigan index of consumer sentiment came in at 61.7 for August, a slight increase from the 61.2 reading in July. Economists had expected a reading of 62.
The index hit a 28-year low of 56.4 in June.
"The biggest boost to the consumer's mood is falling gas prices," Ryan Sweet, economist at Moody's Economy.com, told Bloomberg News. "Sentiment's going to remain under pressure until consumers recognize the economy is finding its footing."
A third report this morning on factory output showed the first gain in 10 months. The Federal Reserve said that output by U.S. factories rose 0.2% in July, following a revised 0.4% gain in June. Economists had expected output to be flat last month.
Buffett's Berkshire owns stakes in NRG
The Oracle of Omaha is betting on NRG Energy (NRG, news, msgs).Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) disclosed in a filing with the Securities and Exchange Commission late Thursday that it owns 3.2 million shares in the energy company as of June 30.
The move makes sense, according to one expert. "It would be logical for him to increase his utility and energy holdings, and NRG would fit in nicely," Frank Betz, money manager at Carret Zane Capital Management, told Bloomberg News. "There's exponentially increasing demand for energy and power."
The filing also said that Berkshire Hathaway now owns 8.9 million shares of railroad company Union Pacific (UNP, news, msgs), up from the 4.45 million shares Buffett's company owned at the end of the first quarter.
Shares of NRG rose 5.5% to $37.15; Union Pacific shares fell 1% to $76.87.
Americans spend more on gas than cars
With oil and gasoline prices soaring in recent months, it's no surprise that many Americans spent a ton of money filling up at the pump. But in June, U.S. consumers spent more on gas than they did on cars for the first time since 1982.Gasoline made up about 4.4% of consumer spending in June, more than the 3.9% spent on automobiles, the U.S. Bureau of Economic Analysis said. In May, both gasoline and autos made up 4% of spending.
"People are spending as much today on gasoline as they did in the 1970s and 1980s," George Magliano, auto analyst for Global Insight, told Bloomberg News. "It's one more statistic in what appears to be an unprecedented string of bad news" for the auto industry and the overall economy.
| Fri. | Thur. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.800% | 1.830% | -0.030 | 10.09% | -42.68% |
| 5-year Treasury note yield | 3.109% | 3.150% | -0.041 | -4.81% | -10.01% |
| 10-year Treasury note yield | 3.852% | 3.892% | -0.040 | -3.19% | -4.54% |
| 30-year Treasury bond yield | 4.473% | 4.519% | -0.046 | -2.82% | 0.31% |
| Currencies | |||||
| U.S. Dollar Index | 77.300 | 76.835 | 0.465 | 5.28% | 0.79% |
| British pound in dollars | $1.8664 | $1.8695 | -0.0031 | -5.88% | -6.18% |
| Dollar in British pounds | £0.5358 | £0.5349 | 0.0009 | 6.25% | 6.58% |
| Euro in dollars | $1.4693 | $1.4813 | -0.0120 | -5.82% | 0.53% |
| Dollar in euros | € 0.6806 | € 0.6751 | 0.0055 | 6.18% | -0.53% |
| Dollar in yen | 110.46 | 109.76 | 0.70 | 2.39% | -1.24% |
| Canadian dollar in U.S. dollars | $0.944 | $0.939 | $0.0051 | -3.37% | -4.88% |
| U.S. dollar in Canadian dollars | $1.060 | $1.064 | -$0.0050 | 3.56% | 5.14% |
| Commodities | |||||
| Gold | $792.10 | $814.50 | -$22.40 | -14.15% | -5.48% |
| Copper | $3.3145 | $3.2980 | $0.02 | -9.48% | 8.99% |
| Silver | $12.9300 | $14.3600 | -$1.43 | -27.32% | -13.34% |
| Corn | $5.2975 | $5.2975 | -$0.28 | -9.83% | 16.30% |
| Crude oil (NYMEX) (per barrel) | $113.77 | $115.01 | -$1.24 | -8.31% | 18.54% |
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