Oil Prices Weigh on Market
Despite Better News on Jobs
By ERIN SCHULTE
THE WALL STREET JOURNAL ONLINE
August 5, 2004 5:46 p.m.
Surging oil prices ripped the rug out from under the market Thursday, with worries about the effect of high crude prices on earnings and the economy trumping better news about the jobs picture.
The Dow Jones Industrial Average tumbled 163.48 points, or 1.6%, to 9963.03, while the Nasdaq Composite Index gave up 33.43, or 1.8%, to 1821.63 -- a new low for the year. The S&P 500-stock index lost 17.93, or 1.6%, to 1080.70, also a low for 2004.
Crude futures leapt1 $1.58 a barrel Thursday, settling at a record $44.41 on the New York Mercantile Exchange. Supply worries arose again when Russian authorities withdrew permission -- granted just one day before -- for oil maker Yukos to access key bank accounts to fund operations, putting in doubt whether the company can continue to produce one million barrels a day.
"Everybody is preoccupied with the price of oil, and is on tenterhooks about the jobs report tomorrow," said Phil Dow, director of equity strategy at RBC Dain Rauscher in Minneapolis. "Once that's out of the way, there'll be the FOMC, then the election, and third-quarter revisions came down a little bit. I can't imagine why an institution would buy anything today."
Meanwhile, a manufacturing group said today it has revised downward2 its forecast for 2004 U.S. gross-domestic-product growth to 4.5%, from its previous forecast of 4.9%. Manufacturing and industrial stocks were taking it on the chin Thursday, hurting the Dow industrial average. 3M slid 1.9%, Alcoa declined 1.8% and Caterpillar gave up 2.9%.
One bright spot was the jobs picture. The Labor Department reported3 first-time claims for unemployment insurance fell by 11,000 last week to 336,000, after a revised increase of 6,000 in the previous week. Economists had forecast a decline of 5,000 applications.
Investors were hesitant to buy ahead of Friday's report on unemployment and nonfarm payrolls for July, which will show the larger picture regarding employment and economic growth.
Among stocks to watch during the session, retailers are reporting July sales figures6. Wal-Mart Stores posted a gain of 3.2% at stores open at least a year, while Neiman Marcus Group posted a 17% gain and sales at upscale retailer Nordstrom rose 6.1%. But stronger sales figures were expected as a rebound from a surprisingly weak June, and shares of Wal-Mart lost 2.2%. Neiman Marcus inched lower and Nordstrom sank 5.2%.
Hip discounter Target also posted improved sales after a lackluster performance in June. Sales at its stores open at least a year rose 3.1% in July. However, the company sounded a cautious note about its prospects for August, with its forecast for same-store sales growth this month topping out at a 2% increase. Its shares lost 3.2%.
And Talbots shares sank 8.3% after the company announced an 8.8% decline in same-store sales.
Corporate earnings reports continue to roll out. Goodyear Tire & Rubber said it returned to profitability in the second quarter, thanks to strong sales growth and increased unit volume. Its shares rose ended up less than 1%.
In major U.S. market action Thursday:
Stocks sank7. On the Big Board, where 1.40 billion shares traded, 2,363 stocks fell and 882 rose. On the Nasdaq, where 1.59 billion shares changed hands, 2,242 declined and 831 advanced.
Bonds advanced8. The 10-year Treasury note rose nearly ¼ point, or $2.50 for each $1,000 invested. The yield, which moves inversely to price, fell to 4.392%. The 30-year bond was ahead ¼ point to yield 5.145%.
The dollar was mixed9. It traded at ¥111.72, up from ¥111.19, while the euro rose against the dollar to $1.2060 from $1.2045 in the previous session.
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