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Stocks Decline on Soaring Oil Prices

Posted on: Wednesday, 28 July 2004, 06:00 CDT

NEW YORK - Stocks sagged Wednesday as investors focused on lower-than-expected durable goods orders and soaring oil prices, shrugging off strong earnings from Boeing Co. and Time Warner Inc.

Oil futures surged close to $43 a barrel, raising worry among analysts that there may not be much relief in sight for the equity markets, which have already been nervous about slower growth in the second half of the year. In the midst of the political conventions and with the presidential election and Olympics still ahead, the market has priced in a sort of "fear premium," attaching greater-than-usual significance to oil prices and other economic indicators, said Jay Suskind, head trader at Ryan Beck & Co.

"The market has been kind of lumbering along with all these worries about the geopolitical situation. No matter what news is out there, it seems to see it as a negative," Suskind said. "When you throw in rising oil prices on top of that, it's just seen as another tax on the economy ... which could eventually sap some of the strength out of the market."

In late morning trading, the Dow Jones industrial average fell 25.88, or 0.3 percent, to 10,059.26.

The broader gauges also fell. The Nasdaq composite index shed 25.87, or 1.4 percent, to 1,843.23. The Standard & Poor's 500 index was down 8.90, or 0.8 percent, at 1,085.93.

The Commerce Department reported orders to U.S. factories for big-ticket items rose 0.7 percent in June, slightly lower than what analysts had forecast. But the gain in orders for durable goods - items expected to last three or more years - was good news after two months of declines, as it offered some hope that the rebound in the nation's manufacturing sector is no longer in danger of stalling.

Investors were less than impressed, however, after a number of business barometers showed signs of weakness last month. Most analysts agree the slowdown is likely temporary, but trading has been lackluster through the current earnings season due to a number of downbeat outlooks.

Adding to that, September crude oil futures on the New York Mercantile Exchange were up $1.06 at $42.90 a barrel.

Among the day's best advancers, Boeing Co. gained 83 cents to $49.05 after reporting better-than-expected profits and raising its forecasts for the rest of this year and next, thanks in part to an improving outlook for the long-stagnant commercial airplane business. The nation's largest aerospace company said it expects to deliver more jets than previously forecast in 2005.

Time Warner Inc. was down 21 cents at $16.70 after reporting profits that were ahead of expectations, and a boost in revenues thanks to the latest Harry Potter movie and its cable services and networks. The media conglomerate, which operates CNN, Warner Bros. and HBO, lost more customers from its long-troubled America Online division, but advertising buoyed revenues and profits there as well.

Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where volume came to 428.72 million shares, compared with 448.56 at the same point Tuesday.

The Russell 2000 index, which tracks smaller company stocks, was down 8.76, or 1.6 percent, at 535.85.

Overseas, Japan's Nikkei stock average finished 1.6 percent higher Wednesday. In afternoon trading in Europe, France's CAC-40 was up 0.2, Britain's FTSE 100 rose 0.6 percent and Germany's DAX index declined 0.3 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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