A sell-off in Shanghai served as an omen for the U.S. equities market today, with Chinese stocks swallowing steep losses on fears that the government might take steps to tighten credit. News on the homefront was equally troubling, as the Commerce Department reported a steep 2.5% drop in durable goods orders during the month of June. On the earnings front, weak quarterly reports from a pair of commodity heavyweights also weighed on sentiment: oil major ConocoPhillips (COP) confessed to a second-quarter net loss in its downstream business, while steel stalwart ArcelorMittal (MT) slumped after offering softer-than-expected third-quarter guidance. As investors weighed these downbeat developments, the market largely shrugged off a cautiously optimistic Beige Book from the Fed. According to the report, the recession's pace appears to be slowing, with the economy even beginning to stabilize in some regions.
Despite a down day, the Dow Jones Industrial Average (DJIA 9,070.72) continued its recent trend of paring losses by the close. The Dow gave up just 26 points, or 0.3%, after shedding nearly 83 points at its intraday nadir. Sixteen of the blue-chip barometer's 30 components closed lower, with Caterpillar (CAT) and Alcoa (AA) leading the way. Home Depot (HD) shares finished flat, while telecom stocks Verizon Communications (VZ) and AT&T (T) paced the 13 advancing issues.
Likewise, the S&P 500 Index (SPX 975.15) swallowed a relatively slim decline of 4.5 points, or 0.5%, after finding intraday support near the 970 region. Finally, the Nasdaq Composite (COMP 1,967.76) rounded out the day's modest losses by closing on a deficit of 7.8 points, or 0.4%. The tech-rich COMP has lately found a floor near the 1,950 neighborhood.
Turning to equities in focus, the star-crossed duo of Microsoft (MSFT) and Yahoo! (YHOO) finally struck a search deal ... Massey Energy (MEE) defied a down day for energy stocks by topping analysts' earnings expectations ... Elsewhere in the world of commodities, Freeport-McMoRan Copper & Gold (FCX) was pummeled by put volume ... Andrea Kramer explained how traders can profit from volatility using the long guts strategy ... Heavily shorted MGM Mirage (MGM) lured in bullish bettors ahead of its earnings report ... and today's Quote of the Day comes from Slate.com's irreverent tech columnist, Farhad Manjoo. In explaining why the Justice Department's Christine Varney should abandon her antitrust crusade against Google (GOOG), Manjoo phrased his opening argument in language that's equal parts Silicon Valley and San Fernando Valley:
"Prosecuting tech giants for getting too big is so last century."
But these weren't the only headlines hitting the Street today. Click on the links below for our Daily Option Blog coverage of:
And, in case you missed it, Joseph Hargett sized up the prospects for Starbucks Corporation (SBUX) in this week's edition of The Casual Contrarian. Click here to watch the video.
For today's activity in crude oil, gold futures, options, and more, turn to page 2.
Crude futures swallowed their largest daily point drop since April, with the commodity coming under pressure as inventories unexpectedly rose during the last week. The Energy Information Administration (EIA) reported today that domestic crude stockpiles swelled by 5.1 million barrels in the week ended July 24, completely defying analysts' expectations for a decline. Additionally, fuel consumption nationwide fell 4.1% during the past four weeks as compared to the same period last year, indicating that energy demand is hardly on the rebound. Strength in the U.S. dollar and a downbeat durable goods report also applied pressure, and crude oil for September delivery eventually settled on a sharp drop of $3.88, or 5.8%, at $63.35 per barrel.
Gold futures couldn't escape the tidal wave of selling pressure that swept over commodities today, particularly as risk-averse traders sent the U.S. dollar soaring against a few key foreign rivals. Following the government's bleak durable goods report, the greenback ticked higher versus the euro, the British pound, and even the Japanese yen. As a result, gold for August delivery gave up $11.90, or 1.3%, to wrap up the session at $927.20 per ounce.
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