Oil Prices Fall Below $89 a Barrel

Oil prices seesawed Monday as gains in global stock markets failed to cancel out worries of a possible U.S. recession that would stunt oil demand.

European stock markets rose again, following last week's rise on Wall Street.

By the afternoon in Europe, London's FTSE index was up 0.5 percent, the CAC-40 in Paris gained 0.7 percent and Frankfurt's DAX was 1.2 percent higher.

Asian stock markets also climbed Monday. China's benchmark Shanghai Composite Index rose 8.1 percent, Hong Kong's Hang Seng index jumped 3.8 percent and Japan's Nikkei 225 index rose 2.7 percent.

Energy investors often view stocks as a proxy for economic growth, and in some recent sessions, movements in the oil market have closely followed that of global equities.

But Monday investors appeared to remain focused on weak economic data in the U.S. that pushed oil futures down nearly $3 a barrel at the end of last week.

"The high volatility in equities at a time when the oil markets are lacking a clear fundamental picture, has led to a greater oil-to-equity correlation in recent weeks," said Olivier Jakob of Petromatrix in Switzerland.

Light, sweet crude for March delivery was down 13 cents to $88.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Earlier Monday, the contract rose as high as $89.39 but also was as low as $88.07.

In London, Brent crude futures rose 1 cent to $89.45 a barrel on the ICE Futures exchange.
The Nymex contract dropped $2.79 to settle at that level Friday after the U.S. Labor Department reported that employers cut 17,000 jobs last month, the first reduction in more than four years and a sign that the economy continues to weaken.

Construction spending also fell by a record amount, according to the Commerce Department, reflecting a sharp pullback in residential building.

Responding to recent oil price declines, the Organization of Petroleum Exporting Countries said Friday it will maintain current oil output levels due to concerns that a weakening global economy will result in softer demand.

However, looking ahead to the next meeting in March, Qatar's Abdullah bin Hamad Al Attiyah said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.

Other issues affecting the market were an attack by Turkish troops on Kurdish rebel targets in northern Iraq and a battle between gunmen and government troops near a petroleum-pumping station in Nigeria's lawless southern oil region.

Neither incident appeared to have disrupted oil flows, but analysts said both were causes for concern.

Heating oil futures rose 0.06 cent to $2.4495 a gallon while gasoline prices fell 0.02 cent to $2.2832 a gallon and Natural gas futures lost 7.9 cents to $7.661 per 1,000 cubic feet.

Latest Updates

11:30 am : In the past half-hour, the Dow climbs to fresh session highs and the S&P trades near its intraday high. The Nasdaq is well off its lows, but has been unable to reach its opening highs as it trades slightly above the unchanged mark.

The International Monetary Fund (IMF) cut its forecast for world growth this year, citing continued stress in global credit markets, according to Reuters. The IMF also warned that economic activity could slow further. It now expects the global economy to grow 4.1%, compared to its earlier forecast of 4.4%.DJ30 +77.72 NASDAQ +3.56 SP500 +7.37 NASDAQ Dec/Adv/Vol 1337/1422/725 mln NYSE Dec/Adv/Vol 1115/1870/477 mln

11:00 am : The major indices are trading in mixed fashion. The Dow and S&P
are holding slight gains, while the Nasdaq is trading with a slight loss. Seven of the ten sectors are higher, led by a 2.6% surge in telecom. Consumer discretionary is the main laggard (-0.7%) as retailers shed 1%.

The market rumor that JPMorgan Chase (JPM 45.95, +0.83) was facing a big derivative loss is not true, according to Reuters, citing sources. JPMorgan has been relatively unscathed by the subprime turmoil that has mired other Wall Street banks.DJ30 +47.13 NASDAQ -3.88 SP500 +4.71 NASDAQ Dec/Adv/Vol 1363/1332/579 mln NYSE Dec/Adv/Vol 1167/1759/366 mln

10:30 am : The stock market is back in the green as it rises in conjunction with financials (+0.7%). JPMorgan (JPM 45.88, +0.31) declined sharply during the recent retreat on a headline that stated there is a rumor the company may be facing a large trading loss. A CNBC commentator has said the rumor is most likely not true, as the stock recovers.

After a rough start, 3M (MMM 77.84, +0.40) is modestly outperforming the broader market. The company reported fourth quarter earnings of $1.19 per share, topping estimates by two cents. The company also reiterated its 2008 guidance. The stock was lower at the start of trading, but has rebounded in the green after traders liked what the company said during its conference call. DJ30 +54.22 NASDAQ -1.21 SP500 +5.23 NASDAQ Dec/Adv/Vol 1397/1195/419 mln NYSE Dec/Adv/Vol 1329/1550/258 mln

10:05 am : Stocks give up their early gains, led by a dip in tech (-0.8%) and financials (-0.2%).
Just hitting the wires, the Conference Board said January consumer confidence was 87.9, down from December's revised reading of 90.6. Economists expected a reading of 87.0. The response immediately after the release was negative, sending the major indices to their session lows.

The weakness in tech is weighing on the Nasdaq, which is now trading with a modest loss. The S&P and Dow are trading with a slight loss.DJ30 -15.52 NASDAQ -16.08 SP500 -2.25 NASDAQ Dec/Adv/Vol 857/1509/134 mln

09:45 am : The stock market opens modestly higher, buoyed by a better than expected durable orders report.

December durable orders rose 5.2%, larger than the expected 1.6% rise. Excluding transportation, orders still rose a healthy 2.6%. This strong level of orders in December does not support the assertion that the economy is in a recession.
Earnings reports have been mostly better than expected, although some companies disappointed with their outlooks.

The consumer confidence reading will be released at the top of the hour.DJ30 +47.31 NASDAQ +7.90 SP500 +6.73

09:13 am : S&P futures vs fair value: +9.2. Nasdaq futures vs fair value: +11.8.

08:59 am : S&P futures vs fair value: +8.7. Nasdaq futures vs fair value: +12.0. Futures continue to point to a higher start. The FOMC begins its two day meeting today, and is set to issue its statement on Wednesday at 14:15 ET. Fed funds futures indicate a 76% chance of a 50 basis point cut, with the rest of the bets on a 25 basis point cut.

08:30 am : S&P futures vs fair value: +9.9. Nasdaq futures vs fair value: +9.5. Stock futures extended their gains, and then climb higher on a better than expected economic release. December Durable orders rose 5.2%, compared November’s revised reading of 0.5%. Economists expected a rise of 1.6%. Countrywide (CFC) reported a fourth quarter loss of $0.79 per share, $0.49 worse than the consensus estimate. The company issued a dividend of $0.15 on its common shares. It will not be holding a conference call to discuss its results due to its pending merger with Bank of America.

08:01 am : S&P futures vs fair value: +3.3. Nasdaq futures vs fair value: flat. Futures point to a flat to slightly higher open. Earnings reports have been mostly better than expected. 3M (MMM) topped estimates by two cents and reaffirmed its FY08 earnings guidance. Eli Lilly (LLY) and EMC (EMC) beat their estimates and provided reassuring FY08 guidance. American Express (AXP) met, but continues to be cautious in its 2008 outlook. VMware (VMW) beat expectations but is getting clipped in pre-market trading after guiding revenues slightly below the consensus estimate.

06:19 am : S&P futures vs fair value: +5.9. Nasdaq futures vs fair value: +3.3.

06:16 am : FTSE...5883.60...+94.70...+1.6%. DAX...6911.98...+93.13...+1.4%.

06:16 am : Nikkei...13478.86...+390.95...+3.0%. Hang Seng...24291.80...+238.19...+1.0%.

Stocks Extend Their Gains Following Employment Report, Hopes for Stimulus Plan

Wall Street scored its second straight big advance Thursday after economic figures suggested the job market is holding up and as lawmakers agreed on measures that could ease concerns about consumer spending. The Dow Jones industrials rose more than 100 points, bringing its two-day gain to more than 400.

While stocks fluctuated throughout the session, trading was decidedly more calm than on Wednesday, when Wall Street executed a stunning turnaround that transformed a sharp sell-off into big gains for stocks. Thursday's rise was notable, however, as investors will often move in a day after a rally or plunge to take profits or scoop up bargains. That the buying largely continued was a positive sign, observers said.

Investors were clearly interested in buying, but despite the size of the advance, there didn't appear to be much conviction to it -- the market is still searching for clues about the economy in hopes of determining whether it will soon pick up or will continue to slow and tip into recession.

In addition, the market wobbled during the session after Fitch Ratings lowered its rating on bond insurer Security Capital Assurance Ltd. Bond insurers have been hurt in the fallout from the mortgage and credit crises, and news of their problems has shaken the market.
But those seeking good news found some in a Labor Department report that said the number of people seeking unemployment benefits last week fell for a fourth straight week. Applications for benefits dropped 1,000 to 301,000, pushing claims down to the lowest level in four months.

Investors also appeared pleased by a widely anticipated agreement between congressional leaders and the White House on an economic stimulus package. The agreement calls for most tax filers to be given refunds of $600 to $1,200, and more if they have children.

Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said Wall Street found some relief from word of the economic stimulus plan as well as the efforts of regulators to help bond insurers. He said the Federal Reserve's decision to lower interest rate this week could also help some struggling homeowners hold on to their properties. The efforts, he said, could ultimately help stave off recession.

"People have that 'R' word stuck on the front of their forehead. It's really just a dramatic slowing of growth. We may not have a recession," Dwyer said.
The Dow Jones industrial average rose 108.44, or 0.88 percent, to 12,378.61, following a nearly 300 point surge on Wednesday. The Dow has not finished higher for two straight sessions since Jan. 9-10.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 13.47, or 1.01 percent, to 1,352.07, and the Nasdaq composite index advanced 44.51, or 1.92 percent, to 2,360.92.
Advancing issues outnumbered decliners by 4 to 3 on the New York Stock Exchange. Consolidated volume came to 5.48 billion shares, down from 7.3 billion Wednesday.

The Dow on Wednesday swung 631.86 points from its low point to its high -- its largest single-day reversal in more than five years.

Stephen Carl, principal and head of equity trading at The Williams Capital Group, said Thursday's overall trading reflected a continuation of the bounce that first began on Tuesday, when the Fed lowered its federal funds rate by a steep 0.75 percentage point, or 75 basis points, to 3.5 percent.

He said investors were also encouraged that the government's rebate plan, while not perfect, appeared to be progressing. Still, despite some investors' mostly upbeat mood, uncertainty remained. The market's about-face Wednesday, while certainly a relief for many investors, illustrated the fractiousness that has settled into Wall Street in recent months.

"We still have a long way to go in getting the economy on track," Carl said. "Whether we dip into a recession or not, a lot of things need to be fleshed out in the markets."

Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.55 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose
.
Light, sweet crude oil for March delivery rose $2.42 to settle at $89.30 a barrel on the New York Mercantile Exchange after the agreement on the economic stimulus plan. Traders wagered the plan to put money in consumers' pockets could increase demand for oil.

Some of Wall Street's most recent concerns relate to the downgrade from Security Capital and broader unease about the stability of bonds. However, investors also looked to New York state regulators in hopes they can hatch a plan to shore up the bond insurance industry. New York Insurance Superintendent Eric Dinallo said in a statement Thursday it likely will take time to draw up measures to help the industry.


After the Fitch downgrade, Security Capital fell $1.16, or 30.6 percent, to $2.63.

Beyond bond insurers, investors have been concerned about the health of corporate profits.

Microsoft Corp. rose more than 4 percent in after-market trading from its Thursday close of $33.25 following the release of its fiscal second-quarter earnings. The company posted a 79 percent jump in profit, surpassing Street expectations, thanks to strong sales of Windows-based personal computers.


The Russell 2000 index of smaller companies dipped 0.71, or 0.10 percent, to 692.72.
Overseas, Japan's Nikkei stock average closed up 2.06 percent and Hong Kong's Hang Seng index fell 2.29 percent. Britain's FTSE 100 finished ahead by 4.75 percent, Germany's DAX index surged 5.93 percent, and France's CAC-40 jumped 6.01 percent.