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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 |
If you see the price of gasoline suddenly move higher this week, blame Hurricane Gustav.
The storm, which formed abruptly on Monday, quickly morphed into a hurricane and appears headed toward the Gulf of Mexico, where it could threaten oil and gas production facilities off Louisiana, Texas and Mexico.
While its track isn't yet clear, just the possibility that the storm could threaten the oil-and-gas infrastructure pushed energy prices higher today -- and kept stocks in check.
It may also stop the slow, steady decline of retail gasoline prices. AAA's Daily Fuel Gauge Report said the national average price of gasoline was $3.672 a gallon today, down a penny from Monday and down 10.7% from its $4.114 peak on July 11.
In fact, wrote Stephen Schork in his daily newsletter, The Schork Report, Gustav will attempt what Dolly, Edouard and Fay failed to do: halt the fall in energy prices.
Crude oil closed at $116.27 a barrel today, up $1.16 from Monday and up 1.5% in two days of trading this week.
Gustav, now a Category 1 hurricane, has the potential to reach Category 4 with winds of at least 131 miles per hour by the time it enters the Gulf, Bloomberg News said. The area is home to about one-fifth of all U.S. oil production and about 16% of natural gas output.
The Dow Jones industrials, meanwhile, closed up 27 points, or 0.2%, to 11,413. That small gain came after a 242-point loss on Monday. The Standard & Poor's 500 Index was up 5 points, 0.4%, to 1,272, thanks mostly to higher prices for energy stocks, which moved higher on the Gustav news.
The Nasdaq Composite Index was off 4 points, or 0.2%, to 2,362. Weakness in key stocks such as Google (GOOG, news, msgs), Microsoft (MSFT, news, msgs) and Qualcomm (QCOM, news, msgs) weighed on the index. (Microsoft is the publisher of MSN Money.)
ExxonMobil (XOM, news, msgs) was the third-best performer among the 30 Dow stocks, rising 1.6% to $79.95 -- after American International Group (AIG, news, msgs), up 4.6% to $19.64, and Home Depot (HD, news, msgs), up 1.7% to $27.02.
Like Exxon, higher energy prices boosted energy stocks. The Amex Oil Index ($XOI.X) was up 1.2% to 1,317. The Amex Natural Gas Index ($XNG.X) added 3.2% to 609, and the Philadelphia Oil Service Sector Index ($OSX.X) was up 2.2% to 300.
The market managed to weather reports suggesting home prices have not yet hit bottom, although the pace of declines is slowing. Home building stocks moved lower. The Philadelphia Housing Sector Index ($HGX.X) fell 0.9% fell 0.9% to 119.
Traders took little from minutes of the Federal Reserve's Aug. 5 meeting on interest rates. Minutes suggest that Fed officials are increasingly worried about inflation pressures and may feel obliged to raise interest rates. But the condition of the economy is so weak that a rate increase isn't likely anytime soon.
At the meeting, the Fed left its key federal funds rate and discount rate unchanged at 2% and 2.25%, respectively. The Fed had raised rates consistently through the summer of 2007 until the financial panic set off by the credit crunch forced the central bank to change course.
With the unofficial end of summer less than a week away, many market players seem to be on vacation. Trading volume on the New York Stock Exchange today was just 856.3 million shares; 1.4 billion is normal. Nasdaq volume of 1.47 billion was off 30% from average -- and is likely to remain anemic throughout the rest of the week.
The dollar continues to move higher
The U.S. dollar continued to rally against major currencies.As of 5:20 p.m. ET, the dollar was up nearly 1% today against the euro, the British pound and the Japanese yen.
So far this quarter, the dollar is up 8.5% against the pound, 6.6% against the euro and 1.8% against the yen -- and it has largely erased its losses earlier this year as oil prices shot higher.
A rising dollar is both good and bad for the domestic economy. It forces commodity prices lower, especially crude oil. But it may also reduce profits for companies with significant overseas sales, such as IBM (IBM, news, msgs), Hewlett-Packard (HPQ, news, msgs) and Google (GOOG, news, msgs).
Until the dollar turned, these companies' earnings were getting a big bounce higher from their non-U.S. operations because the falling dollar boosted the value of overseas profits.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $116.27 | $113.01 | $1.16 | -6.29% | 21.14% |
| Heating oil (per gallon) | $3.2099 | $3.1514 | $0.0585 | -6.65% | 21.16% |
| Natural gas (per million BTU) | $8.2780 | $7.8250 | $0.4530 | -9.22% | 10.62% |
| Unleaded gasoline (per gallon) | $2.9697 | $2.8823 | $0.0874 | -2.57% | 19.23% |
Home prices still falling
Home prices are still falling back to levels last seen in 2005, but the pace of declines may be declining.The Standard & Poor's/Case-Shiller home price index showed that home prices in 20 major markets continued to fall in the second quarter, but the good news was that the declines seemed to be moderating.
Prices were down 15.4% in the second quarter compared with a year ago, the report showed today -- worse than the 14.2% drop seen in the first quarter.
The 20-city index showed a 15.9% decline in the second quarter from a year ago. Las Vegas saw the biggest price drop, with a 28.6% year-over-year decline; Denver saw prices rise 1.5% in June.
Still, there was a glimmer of hope in the report: Home prices fell 0.5% in the second quarter of the year from the first quarter. That suggested some improvement because the index fell 0.9% in the first quarter from the fourth quarter.
"I think we are stabilizing," David Blitzer, chairman of the index committee, told CNBC. "We are seeing some hints of bottoms" and "hints of stability. That's a big difference from where we were six months ago."
Another report on home prices echoed the S&P/Case-Shiller report. The Office of Federal Housing Enterprise Oversight (OFHEO) said home prices fell 1.4% in the second quarter, a slight improvement from the 1.7% decline seen in the first quarter of the year. The year-over-year decline was 4.8%.
The OFHEO index covers only sales of homes mortgaged through Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) and does not include prices of homes financed with subprime loans.
Prices fell 4.8% over the past year, OFHEO's report said.
Why the disparity between the S&P/Cash-Shiller numbers and OFHEO? One word: Foreclosures.
When a foreclosed home comes on the market, they tend to be sold at prices that are at least 33% lower than the last transaction -- the one that got the buyers into trouble.
The price discounts on foreclosed homes may be even larger, Merrill Lynch economists Sheryl King and David Rosenberg noted this afternoon. That's because the Case-Shiller methodology gives lesser weight to homes sold at huge discounts.
When will the housing market bottom? CNBC's Jim Cramer predicted the bottom will come next summer. That's because he believes home building stocks bottomed in mid-July (along with financial stocks). And he believes the bottom for the stocks will come roughly a year before the actual bottom.
In addition, he believes the federal government will take over Fannie Mae and Freddie Mac, which might halt the recent rise in mortgage rates.
Data from Bankrate.com suggest 30-year fixed mortgage rates jumped 5.6% in early April to 6.5% in mid-July. Bankrate said the rate was 6.33% today.
New-home sales remain weak
New-home sales came in below economists' expectations, however: New-home sales rose 2.4% in July, to an annualized rate of 515,000 units, the Commerce Department reported this morning. Economists expected a sales rate of 520,000. In June, new-home sales were revised lower; sales fell 2.1% to 503,000 in June, down from a previous estimate of 530,000. The lower June figure is the lowest since September 1991.The report on new-home sales follows Monday's report on existing-home sales from the National Association of Realtors. That report showed a 3.1% increase in sales last month, to a seasonally adjusted annual rate of 5 million -- the highest level in five months. But the inventory of unsold homes also jumped in July, up 3.9% to 4.67 million units, a supply of 11.2 months.
The housing slump will likely continue until "well into 2009," Housing and Urban Development Secretary Steve Preston told Bloomberg News. "I think we're right in the middle of it, and I think we have a ways to go before we start seeing a turnaround," Preston added.
Home builders were mostly lower. Ryland (RYL, news, msgs) fell 1.4% to $20.85. Pulte Homes (PHM, news, msgs) fell 3.3% to $12.75. Lennar (LEN, news, msgs) fell 5.2% to $11.04.
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"Consumer confidence readings suggest that the economy remains stuck in neutral, but may be showing signs of improvement by early next year," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement.
Rio Tinto profit jumps
Mining company Rio Tinto (RTP, news, msgs) this morning said first-half profit more than doubled, to $6.91 billion, from $3.25 billion in the same period last year.Stock Chart (Year)
Rio Tinto
Shares, which had been down all morning, were up 0.7% to $382.15.
"Although we have seen some moderation in growth rates in developed countries, the impact on our markets has been modest due to continued strong growth in developing countries," Chairman Paul Skinner said today on a conference call. "Prices for our products remain high by historic standards."
Since November, Rio Tinto has been fighting a hostile takeover bid from rival BHP Billiton (BHP, news, msgs).
Coach, Anadarko to buy back shares
Luxury retailer Coach (COH, news, msgs) late Monday said its board of directors authorized another $1 billion share-buyback program, to be completed by June 26, 2010.The news sent shares up 6.7% to $28.18.
Coach said that it had just completed the $1 billion buyback program that began in November 2007.
Anadarko Petroleum (APC, news, msgs) also announced a share-buyback program late Monday. The oil and gas company said it will buy back $5 billion of its shares over the next three years. The company said it will repurchase about $600 million by the end of this year.
Shares of Anadarko rose 6.4% to $61.54.
Temp jobs are falling
The economy has shed jobs for the past seven months in a row, and no industry seems safe.In fact, temporary and contract staffing jobs fell 6.5% in the second quarter, according to the American Staffing Association. It was the third quarter in a row that temp and contract jobs fell, the group said.
While the job losses seem grim, they weren't as bad as those in the second quarter of 2001, the country's most recent full-blown recession, when staffing jobs fell by 15.7%.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.675% | 1.645% | 0.030 | 2.45% | -46.66% |
| 5-year Treasury note yield | 3.048% | 3.040% | 0.008 | -6.67% | -11.78% |
| 10-year Treasury note yield | 3.784% | 3.791% | -0.007 | -4.90% | -6.22% |
| 30-year Treasury bond yield | 4.395% | 4.403% | -0.008 | -4.52% | -1.44% |
| Currencies | |||||
| U.S. Dollar Index | 77.345 | 76.905 | 0.440 | 5.35% | 0.85% |
| British pound in dollars | $1.8376 | $1.8529 | -0.0153 | -7.33% | -7.63% |
| Dollar in British pounds | £0.5442 | £0.5397 | 0.0045 | 7.91% | 8.26% |
| Euro in dollars | $1.4631 | $1.4762 | -0.0132 | -6.22% | 0.10% |
| Dollar in euros | € 0.6835 | € 0.6774 | 0.0061 | 6.63% | -0.10% |
| Dollar in yen | 109.77 | 109.29 | 0.48 | 1.75% | -1.86% |
| Canadian dollar in U.S. dollars | $0.954 | $0.952 | $0.0022 | -2.36% | -3.88% |
| U.S. dollar in Canadian dollars | $1.049 | $1.050 | -$0.0015 | 2.50% | 4.06% |
| Commodities | |||||
| Gold | $828.10 | $825.70 | $2.40 | -10.25% | -1.18% |
| Copper | $3.4165 | $3.4645 | -$0.05 | -6.69% | 12.35% |
| Silver | $13.6780 | $13.4790 | $0.20 | -23.11% | -8.32% |
| Corn | $5.7525 | $5.8025 | -$0.05 | -2.09% | 26.29% |
| Crude oil (NYMEX) (per barrel) | $116.27 | $115.11 | $1.16 | -6.29% | 21.14% |
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