Dow up 69 as rising crude boosts oil stocks

By Charley Blaine and Elizabeth Strott

Stocks struggled, really struggled, to small gains today, amid savage selling of shares of mortgage suppliers Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) and a late-day rally in crude oil.

The Dow Jones industrials finished the day up 69 points, or 0.6%, to 11,417. The Standard & Poor's 500 Index added 8 points, or 0.6%, to 1,275, and the Nasdaq Composite Index finished up 5 points, 0.2%, to 2,389.

Crude closed up 45 cents a barrel to $114.98 despite a government report showing a much-larger-than-expected increase in domestic supplies in the latest week. Also helping crude:

• Russia's threat to retaliate against Poland for agreeing to let the United States put missile defense systems on Polish soil.

• A defiant forecast from Goldman Sachs that crude will end 2008 at $149 a barrel.

Energy stocks were largely responsible for the late-day market rally; indeed ExxonMobil's (XOM, news, msgs) 1.1% gain to $78.81 and Chevron's (CVX, news, msgs) 2.1% gain to $86.46 added 21 points to the Dow. The Amex Oil Index ($XOI.X) was up 2.5% to 1,317. The Amex Natural Gas Index ($XNG.X) added 3.4% to 600, and the Philadelphia Oil Service Sector Index ($OSX.X) was up 3.3% to 297.

But many financial stocks also moved higher as well. The Select Sector SPDR-Financial (XLF, news, msgs) exchange-traded fund moved up 2.1% to $20.35 and was the second-best ETF of the 10 that mimic the 10 sectors of the S&P 500.

Fifteen of the 30 Dow stocks were higher today, led by Hewlett-Packard (HPQ`, news, msgs), up 5.7% to $46.16 after reporting strong fiscal third quarter earnings.

At the same time, 278 S&P 500 stocks were higher, along with 43 stocks in the Nasdaq-100 Index $NDX.X, which tracks the largest stocks in the Nasdaq.

Thursday is relatively light on economic reports: the weekly report on unemployment claims and the monthly report on leading economic indicators.

Earnings reports are due from Barnes & Noble (BKS, news, msgs), Gap (GPS, news, msgs) and Toro (TTC, news, msgs), the lawn mower maker.

All will offer more detail about the health of the consumer. Toro cut its fiscal 2008 guidance in May, citing a softer economy. The stock is down 33% this year.

U.S. stocks also may be buffeted by Toyota Motor (TM, news, msgs). Marketwatch reported that the company plans to cut its 2009 sales forecast by 5.8% to 9.8 million units. The cut is due to weakening demand for automobiles in the world's major economies.

Waiting for the Feds?

Fannie Mae and Freddie Mac were down 26.8% to $4.40 and 22.1% to $3.25, respectively, as speculation grew that the Treasury Department will be forced to inject billions of dollars to shore up their operations.

The working assumption today (and for the last week or so) was that the Treasury Department will be forced to put capital into Fannie Mae and Freddie Mac and wipe out existing shareholders' equity in the process.

At the same time, there is a huge unknown that has many quite concerned: whether the daily operations of Fannie Mae and Freddie Mac will be disrupted.

Because the companies supply roughly half the capital used by lenders to make mortgages, the nation's depressed housing market could be slammed yet again. Already, homebuyers are finding that rising credit standards from lenders are limiting their ability to finance home purchases.

Because of the uncertainty, the two companies are facing sharply higher credit costs to finance their daily operations. In a Tuesday auction of 5-year notes, Freddie Mac was forced to pay a very high borrowing premium: 1.13 percentage points higher than the yields on 5-year Treasuries, which are considered the safest in terms of risk. Earlier this year, Bloomberg News said, the premium was as low as 0.6 points.

So far, the Treasury has said it has no plans to inject capital into the companies, but few people on Wall Street believe the government. As a result, short-sellers have been able to push the stock lower at will.

"We believe Treasury is going to be forced to act within the next couple of weeks," Sean Egan, managing director of Egan-Jones Ratings, a credit ratings firm, told The New York Times. "Probably sometime after Labor Day, when investors are back from vacations so that the bailout has the biggest possible positive impact."

CNBC's Jim Cramer suggested today that the reason the stocks are so low is that someone knows absolutely that the government takeover is coming. He also said he was astounded that neither the New York Stock Exchange nor the Securities and Exchange Commission halted trading in the stocks.

Pimco's Bill Gross said on CNBC today that the government needs to invest $15 billion to $20 billion in preferred stock in the two companies as soon as possible.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$114.98	$113.01	$0.45	-7.33%	19.80%
Heating oil (per gallon)	$3.1635	$3.1237	$0.0398	-8.00%	19.40%
Natural gas (per million BTU)	$8.0770	$7.9760	$0.1010	-11.43%	7.94%
Unleaded gasoline (per gallon)	$2.9103	$2.8639	$0.0464	-4.52%	16.84%

Goldman Sachs still sees $149 crude at year's end

Here's why Goldman Sachs sees crude ending the year at $149 a barrel: Strong fundamentals are a more important factor than a strengthening dollar.

Goldman Sachs said that despite the recent negative correlation between the U.S. dollar and oil prices, there is "very little correlation between oil prices and the U.S. dollar over the longer term."

The investment bank sees the oil market being supported in the short term by limited OECD oil stocks, a possible recovery in U.S. oil demand, near 10% growth in Chinese oil demand year-on-year in July and a drop in non-OPEC production.

HP profit rises to $2 billion

Hewlett-Packard shares moved higher after the tech giant said it earned $2.03 billion, or 80 cents a share, in its fiscal third quarter. That was up 14% from $1.78 billion, or 66 cents a share, a year ago. Excluding one-time items, HP earned 86 cents a share, 2 cents better than Street estimates.

HP's total revenue rose 10% to $28 billion, also ahead of analysts' expectations. Sales in the U.S. rose a modest 4%, but sales in the Africa, Europe, Asia Pacific and Middle East regions jumped 16%. Sales in the BRIC countries (Brazil, Russia, India and China) soared 24% in the quarter. HP's computer sales rose 15% overall.

"These results are quite strong," analyst Shaw Wu of American Technology Research, told Bloomberg News. "It's the broadness of their portfolio and international mix that allows them to do better than (rival) Dell (DELL, news, msgs)." (Dell shares rose 2.2% to $24.97 today.)

HP took over as the No. 1 personal computer maker in late 2006.

The company also gave positive guidance for its current quarter: HP expects to earn $1.01 to $1.03 per share excluding costs on revenue between $30.2 billion and $30.3 billion. The forecast does not include HP's pending deal to buy Electronic Data Systems (EDS, news, msgs), which the PC giant agreed in May to acquire for $13.9 billion.

Analysts are looking for earnings of $1 per share on sales of $30.3 billion in the current quarter.

Rolling snake-eyes in Macau?

Here's a nasty roll of the dice.

Shares of casino companies Las Vegas Sands (LVS, news, msgs), Wynn Resorts (WYNN, news, msgs), MGM Mirage (MGM, news, msgs) and Melco Crown Entertainment (MPEL, news, msgs) were beaten up on Tuesday and were down again today because China may be worried that its people are gambling too much.

Las Vegas Sands fell 8.2% to 41.80; Wynn Resorts dropped 4.4% to $91.82; MGM Mirage lost 0.6% to $28.20, and Melco Crown Entertainment moved down 3.1% to $6.28.

So, the Chinese government may further curb travel to Macau,

, the former Portuguese colony near Hong Kong that has emerged as the Las Vegas of Asia. Right now, a Chinese citizen can visit once every two months. The proposal is to tighten the limit to once every six months, according to the Portuguese news agency Lusa.

Needless to say, trimming the potential audience would not help the casino companies, which have invested billions to make Macau into, well, Macau. Macau's casinos right now generate more money than Las Vegas and Atlantic City combined. Gambling revenue in Macau jumped 55% to $7.3 billion in the first half of 2008.

In a bit of understatement, Lehman Bros. analyst Felicia Kantor Hendrix wrote clients that "the potential for China to continue to slow visitation, and hence gaming revenues in Macau, underscores a major risk of operating in this region."

The Chinese can't do that, can they? Seems they can. Chinese citizens need an internal passport to travel around the country, and the government can tell its citizens how many times they may visit any city in any time period.

In fact, the authorities have also required separate visas for visiting via Hong Kong, and halved the maximum time mainland Chinese travelers may stay in the city while en route to other destinations to curb a surge in high-roller gambling.

But is that what's really going on? Maybe not. In an analyst note on Tuesday, however, Jefferies & Co. analyst Lawrence Klatzkin said investors' worries about visa issues and slower gambling revenue are "way overblown."

Klatzkin has predicted slower revenue growth in the second half of 2008 and the first half of 2009 because there will be no significant capacity boost during that time. He expects a resurgence in the second half of 2009, when three major properties are scheduled to open.

But, assuming the report on visit restrictions is true, Minyanville's Jeff Mackie suggested today on CNBC, the real goal of the Chinese is to get a larger share of the revenue from the gambling companies.

SEC will replace the Edgar database system

If you're a user of EDGAR, the database for corporate filings with the Securities and Exchange Commission, start getting ready for Edgar's replacement.

The new system will be called Idea, short for Interactive Data Electronic Applications. SEC Chairman Christopher Cox said this week it would offer investors more accurate and more useful information about public companies and mutual funds.

Edgar, short for electronic data gathering analysis and retrieval system, handles more than 500,000 financal statements every year from corporations, mutual funds and other entities.

• Company Focus: A revolution for small investors

The new system will be based on XBRL, or extensible business reporting language, and will use digital tags to each piece of data so investors can easily find and compare key financial figures.

IDEA, which has cost millions to develop, will start being available later this year and will replace Edgar in about three years, the SEC said.

The largest companies must file documents with the SEC using IDEA starting next year.

Analog Devices' profit jumps

Quarterly profit rose at another tech company, but results missed Wall Street's estimates.

Analog Devices (ADI, news, msgs) late Tuesday said fiscal-third-quarter net income climbed 15% to $138.6 million, or 47 cents per share. Excluding items, Analog earned 44 cents per share, a penny shy of the consensus estimate.

Last year, the company earned $120.4 million, or 37 cents per share.

Sales rose nearly 7% to $659 million, missing analysts' expectations for $660.8 in quarterly revenue.

Shares of the stock fell 8.9% to $29.29. For the current quarter, Analog has forecast earnings of between 44 and 46 cents; the consensus estimate is for 46 cents per share.

Goldman down on financials

Shares of Morgan Stanley (MS, news, msgs), JPMorgan Chase (JPM, news, msgs), Citigroup (C, news, msgs) and Merrill Lynch (MER, news, msgs) all moved higher, despite Goldman Sachs' (GS, news, msgs) cutting earnings estimates for the four and Lehman Bros. (LEH, news, msgs).

"We expect third-quarter results will be hampered by declining global equity markets, further deterioration in mortgage assets, and slower levels of corporate and institutional activity," wrote Goldman analysts led by William Tanona in a note to clients.

Tanona said that moves by financials to write down assets and get bad debt off their books are encouraging but that recovery for the sector "is still a few quarters away."

Morgan Stanley was off 1.8% to $37.40. But Merrill Lynch rallied 2.5% to $24.41. Citigroup added 1.8% to $17.49, and JPMorgan Chase was up 4% to $37. Lehman Bros. jumped 5.1% to $13.73.

Goldman, too, is under pressure, according to one industry observer.

"The market has turned against the premier investment bank as it now appears to lump its chances in with the balance of the industry," Douglas McIntyre wrote on the 24/7 Wall Street Web site. "The immunity that Goldman has had for so long has gone away."

Goldman is down 37% on the year. And after jumping 25% between the market bottom July 15 and a top on July 23, the stock has fallen 17% -- more than JPMorgan, Citigroup or Merrill Lynch.

Goldman was down 0.2% to $158.25 this afternoon.

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

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.670%	1.765%	-0.095	2.14%	-46.82%
5-year Treasury note yield	3.012%	3.071%	-0.059	-7.78%	-12.82%
10-year Treasury note yield	3.799%	3.842%	-0.043	-4.52%	-5.85%
30-year Treasury bond yield	4.443%	4.469%	-0.026	-3.48%	-0.36%
Currencies
U.S. Dollar Index	77.095	76.985	0.110	5.01%	0.52%
British pound in dollars	$1.8612	$1.8681	-0.0070	-6.14%	-6.44%
Dollar in British pounds	£0.5373	£0.5353	0.0020	6.54%	6.88%
Euro in dollars	$1.4706	$1.4793	-0.0087	-5.74%	0.62%
Dollar in euros	€ 0.6800	€ 0.6760	0.0040	6.08%	-0.61%
Dollar in yen	109.96	109.65	0.31	1.93%	-1.69%
Canadian dollar in U.S. dollars	$0.942	$0.943	-$0.0012	-3.65%	-5.16%
U.S. dollar in Canadian dollars	$1.063	$1.061	$0.0022	3.87%	5.45%
Commodities
Gold	$816.30	$816.80	-$0.50	-11.53%	-2.59%
Copper	$3.3955	$3.4270	-$0.03	-7.26%	11.66%
Silver	$13.1530	$13.2200	-$0.07	-26.07%	-11.84%
Corn	$5.7525	$5.7525	$0.11	-2.09%	26.29%
Crude oil (NYMEX) (per barrel)	$114.98	$114.53	$0.45	-7.33%	19.80%