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Gold and stocks go down together Original Source Link: (May no longer be active)
http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=6309489http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=6309489
GLOBAL MARKETS-Jump in oil pushes U.S. stocks down, bonds up
Wed Sep 22, 2004 06:04 PM ET
By Mike Miller
NEW YORK, Sept 22 (Reuters) - A surge in oil prices above $48 a barrel sent U.S. stock markets tumbling sharply on Wednesday, but bond markets rallied as traders took the news as a portent of economic weakness that should help keep a lid on interest rates.
Crude oil's jump to within a dollar of its record high depressed stock prices, as higher energy costs tend to cut into corporate profit margins and consumer spending.
The shares of investment bank Morgan Stanley (MWD.N: Quote, Profile, Research) and brokerage Bear Stearns Cos. Inc. (BSC.N: Quote, Profile, Research) fell after both firms reported declines in quarterly profits.
The stock of mortgage finance company Fannie Mae (FNM.N: Quote, Profile, Research) fell almost 7 percent after a U.S. government review questioned its accounting methods.
Tech stocks were hurt by a brokerage downgrade of Cisco Systems Inc. (CSCO.O: Quote, Profile, Research) .
The blue-chip Dow Jones industrial average fell 135.75 points, or 1.33 percent, to 10,109.18, its lowest close in more than three weeks. The Standard & Poor's 500 Index ended down 15.74 points, or 1.39 percent, at 1,113.56. The technology-heavy Nasdaq Composite Index closed down 35.47 points, or 1.85 percent, at 1,885.71.
DEBT MARKETS TAKE HEART
U.S. Treasury prices rallied in response to the rising oil prices and weak stocks.
The yield on the benchmark 10-year note (US10YT=RR: Quote, Profile, Research) , which moves inversely to its price, dropped below 4.0 percent for the first time in five months.
"Investors are wondering: Is the rise in oil prices going to curtail consumer spending? Is it going to hold businessmen back from hiring?" said Josh Stiles, senior bond strategist at IDEAglobal.
If so, the resulting economic weakness could keep interest rates down, helping bond prices.
The 10-year Treasury note rose 17/32 to 102-5/32 for a yield of 3.98 percent, down from 4.04 percent late Tuesday.
The 30-year bond (US30YT=RR: Quote, Profile, Research) was up 1-3/32 at 108-31/32, yielding 4.77 percent, down from 4.84 percent. The two-year note (US2YT=RR: Quote, Profile, Research) was up 1/32 at 99-27/32, its yield steady at 2.47 percent.
The dollar strengthened, erasing losses suffered a day earlier as markets digested Tuesday's comments from the Federal Reserve and concluded that an interest-rate tightening cycle was still under way. Higher interest rates make the dollar more attractive to foreign investors.
In late afternoon U.S. trade, the euro (EUR=: Quote, Profile, Research) was down about 0.5 percent at $1.2265. Against the yen (JPY=: Quote, Profile, Research) , the dollar was up about 0.8 percent at 110.56 yen.
OIL JUMPS AS STOCKPILES DWINDLE
Oil prices jumped after the U.S. government reported a big drop in oil stockpiles because of disruptions from Hurricane Ivan.
On the New York Mercantile Exchange, November-delivery crude (2CLX4: Quote, Profile, Research) ended at $48.35 a barrel, up $1.59 after hitting $48.65 at midday. At the close, NYMEX crude was just $1.05 shy of the $49.40 record struck on Aug. 20. The gains came after the U.S. Energy Information Administration said crude supplies fell 9.1 million barrels last week due to the hurricane.
U.S. oil supplies in the wake of Ivan dropped to the lowest since February, and well below the average range in the run up to winter, when heating oil demand hits its peak, according to the EIA's weekly report.
"The market is clearly responding to the inventory report," said Mike Fitzpatrick, vice president for energy risk management at FIMAT USA.
Gold ended lower on New York's COMEX as investors weighed the rise in the dollar and surge in oil prices.
December gold (2GCZ4: Quote, Profile, Research) ended down $1.10 at $409.00 an ounce. Spot gold wrapped up at $406.75/7.50, down from $409.15/9.90 late Tuesday. London's late fix was $405.35.
Europe's top shares ended near a week low after a disappointing strategy update from major oil company Royal Dutch/Shell (SHEL.L: Quote, Profile, Research) and as weak earnings in the U.S. financial sector pressured European peers.
The FTSE Eurotop 300 index of pan-European blue chips shed 0.6 percent to end at 996.72, while the narrower DJ Euro Stoxx 50 index fell 1.1 percent to 2,759.68.
Japan's Nikkei average fell for a fifth straight day, hitting a one-month closing low as key exporters and techs such as Kyocera Corp. (6971.T: Quote, Profile, Research) fell on renewed caution about the country's economic outlook. Japanese markets will be closed on Thursday for a national holiday.
The Nikkei lost 0.55 percent or 61.46 points to 11,019.41, its lowest close since Aug. 24. That added to a loss of 215 points or 1.9 percent in the previous four trading days.
The broader TOPIX index closed down 0.17 percent at 1,114.08, its lowest finish since Aug. 20.
(Reporting by Ros Krasny, John Parry, Alden Bentley, Marie Maitre and Mariko Katsumura)
© Reuters 2004. All Rights Reserved.
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