Stocks lost ground on Wednesday after crude oil prices climbed to a fresh high of nearly $65, neutralizing positive economic sentiment that drove stock gains in the morning.
The Dow Jones industrial average fell 21.26 points, or 0.2%, to 10,594.41. The broader Standard & Poor's 500 index was down 2.25 points, or 0.18%, to 1,229.13. The tech-heavy Nasdaq composite lost 16.38 points, or 0.75%, to 2,157.81.
In the energy markets, September West Texas Intermediate crude oil jumped $1.83 to $64.90 a barrel, driven by drawdowns in gasoline inventories, as well as trouble at refineries, reports Standard & Poor's MarketScope. Weekly EIA data showed a surprising build in weekly crude inventories, which initially led to a round of profit taking. But a larger than expected draw in gasoline stocks rekindled supply concerns, and lifted the entire NYMEX complex higher through the close, says Action Economics. Front-month gasoline rose to a record $1.8977 a gallon, and is up nearly 10% since Aug. 1, reports Action Economics.
Coming Thursday is a report on retail sales, which is forecast to jump 2.0% overall in July, thanks to the strength in unit vehicle sales on the "employee discounts for everyone" programs. Excluding autos, retail sales are pegged to rise a healthy 0.7%, pushed up by rising gas prices and decent chain store sales. "The data should set a solid trajectory for Q3 spending and GDP," says Action Economics.
There were no major economic reports on Wednesday.
Among stocks moving Wednesday, Fannie Mae (FNM ) fell after the mortgage finance company says it expects to hire 1,500 consultants and spend $420 million or more this year on earnings restatement and legal costs. It says it will not file 2005 financial statements until after reaudit is complete sometime in the second half of 2006.
Krispy Kreme Doughnuts (KKD ) says a special committee of the board completed its investigation, and estimates financial restatements will reduce the company's pretax income by a total of $25.6 million over the past few years through the third quarter of fiscal year 2005. The stock rose.
In earnings news, Cisco Systems (CSCO ) reported fourth-quarter earnings per share of 24 cents (GAAP basis), vs. 20 cents a year ago, on an 11% sales rise. The stock fell, as the company's outlook is considered disappointing.
Walt Disney (DIS ) posted 41 cents, vs. 29 cents, third-quarter EPS on a 3% revenue rise.
In deal news, Yahoo (YHOO ) may pay $1 billion and hand its China operations over to Alibaba.com in return for a 35% stake in the Chinese e-commerce company, according to The Wall Street Journal. Shares of Chinese Internet search outfit Baidu.com (BIDU ) were also up on the news.
Carl Ichan plans to lead an investor group that intends to push media giant Time Warner (TWX ) into selling a big chunk of its cable-TV business, and possibly spinning off its publishing operations, according to The Wall Street Journal.
Post-FOMC short-covering quickly ran its course in the bond market, with yields reversing higher in the afternoon after the market ran afoul of the second leg of quarterly Treasury refunding on low foreign demand, reports Action Economics. The 10-year note yield settled at 4.40%.
European stock markets finished higher on Wednesday.
London's Financial Times-Stock Exchange 100 index was up 13.8 points, or 0.26%, to 5,377.5 as the Bank of England said U.K. economic growth will accelerate by 2007, making it less likely that the bank will cut interest rates for a second time this year. Among stocks on the move, Shell was up after resuming share buyback program and predicting higher earnings. Kingfisher rose on a report Warren Buffett's Geico unit bought shares in the company.
Germany's DAX index jumped 81.09 points, or 1.65%, to 4,990.57 on takeover rumors and carryover from the U.S. market rally. Commerzbank was sharply higher and BNP Paribas was off a bit amid unconfirmed rumors BNP may make a takeover bid for Commerzbank; neither bank had comment. Lufthansa up on stronger than expected earnings. Allianz was up after reporting higher second-quarter earnings. Bayer down as second-quarter results missed expectations.
In Paris, the CAC 40 index gained 35.42 points, or 0.79%, to 4,527.11. Infogrames Entertainment was lower after reporting a first-quarter loss. Ales was higher after the company reported second quarter sales rose 9.4%. Sodifrance was lower as second-quarter sales fell.
Asian markets finished with strong gains on Wednesday.
Japan's Nikkei 225 index jumped 197.76 points, or 1.66%, to 12,098.08 as the government said the economy has emerged from a standstill. Late yesterday, the Bank of Japan revised upward its assessment of the economy for the second consecutive month, citing increases in exports and wages. Gains in the U.S. after yesterday's FOMC meeting also provided a positive backdrop, says Standard & Poor's MarketScope.
In Hong Kong, the Hang Seng index surged 298.57 points, or 1.98%, to 15,346.41. The index rallied to a four-year high as telco bellwether China Mobile posted better-than-expected first half results, joining others that have announced strong earnings in recent days. Buyers came into the market with force in the afternoon, pushing the Hang up steadily to close at its high for the day, says Standard & Poor's MarketScope.