Stocks Fall As Investors Eye Oil Prices

NEW YORK – Stocks lost ground in quiet trading Thursday as most investors stayed on the sidelines, keeping a wary eye on oil prices and waiting for the government’s employment report at week’s end.

The Labor Department reported a drop in weekly first-time jobless claims before the session, but the markets were looking to Friday’s job creation report for a reading on whether the economy could continue to create jobs. Last month’s report fell markedly short of economists’ expectations.

Oil prices continued to weigh heavily on the market, one day after reaching the $44 per barrel mark. A barrel of light crude was quoted at $43.10, up 27 cents, on the New York Mercantile Exchange. Over the past few weeks, drops in stock prices have corresponded almost directly to rising oil prices, which have climbed on terrorism fears.

“We’ve had some good economic numbers, but with the high price of oil and the terror alert, there’s a lot of pressure on the market on a short-term basis,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “These oil prices will eat away at consumer confidence, consumer spending and start to affect business decision making.”

In late morning trading, the Dow Jones industrial average fell 13.79, or 0.1 percent, to 10,112.72.

Broader stock indicators were modestly lower. The Standard & Poor’s 500 index dropped 2.45, or 0.2 percent, to 1,096.18, and the Nasdaq composite index was down 2.75, or 0.2 percent, at 1,852.31.

The Labor Department reported a drop of 11,000 first-time unemployment filings, and said the number of people who continue to receive benefits fell by 35,000 to 2.91 million – down from 3.62 million a year ago.

Concerns over oil prices, however, overshadowed the report. Higher oil prices could cause inflation as retailers pass higher shipping costs to customers, and put a dent in consumer spending as Americans pay more at the gas pumps.

That’s put retail sales figures, a barometer of consumer spending, under close scrutiny. Major retailers announced mixed sales data Thursday, with many apparel merchants issuing disappointing numbers. Major retailers like Wal-Mart Stores Inc. and Target Corp. had stronger sales in July that were mostly in line with expectations, but investors were hoping for better news. Wal-Mart fell 41 cents to $52.79, while Target skidded 42 cents to $42.71.

Goodyear Tire & Rubber Co. was up 29 cents at $11.14 after it swung to a profit in the second quarter on record tire sales. The company posted earnings of 14 cents per share, 6 cents better than analysts’ estimates.

Generic drug maker Barr Pharmaceuticals Inc. saw a drop off in second-quarter earnings because of heavy litigation charges. Without the one-time expenses, Barr edged past Wall Street expectations by 2 cents per share. Barr, which gave an improved 2005 outlook, surged $1.63 to $37.35.

Frontier Oil Corp., like many energy companies, showed strong earnings thanks to this year’s rise in oil prices. Frontier beat expectations by 25 cents per share, but fell 59 cents to $19.95.

Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where volume came to 353.52 million shares, compared with 372.49 million at the same point Wednesday.

The Russell 2000 index of smaller companies was down 2.57, or 0.5 percent, at 540.10.

Overseas, Japan’s Nikkei stock average rose 0.5 percent. In afternoon trading, Britain’s FTSE 100 was up 0.3 percent, Germany’s DAX index climbed 0.4 percent, and France’s CAC-40 gained 0.8 percent.

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