- The Washington Times - Friday, August 12, 2005

NEW YORK (AP) — Wall Street retrenched yesterday as the trade deficit widened and oil prices surged, while a weak quarterly report from Dell Inc. also disheartened the market. The major indexes ended the week mixed.

Traders were displeased when the Commerce Department reported that the trade deficit, the imbalance between what America sells abroad and what it imports, is running higher than last year’s all-time record. The trade deficit rose to $58.8 billion in June, an increase of 6.1 percent from the May deficit of $55.4 billion.

More than half the deterioration in June reflected America’s surging foreign oil bill, which hit a record high of $19.9 billion, an increase of almost 10 percent from May. Analysts say climbing oil prices will send that figure higher in coming months.

Crude oil futures hit new records on reports of U.S. refinery outages. A barrel of light crude closed at $66.86, up $1.06, on the New York Mercantile Exchange.

In company news, a rare disappointment from Dell sent its stock sharply lower and sparked selling in other tech stocks. Its second-quarter revenue was nearly $300 million below analysts’ forecast and its third-quarter outlook was also well below projections. And McDonald’s Corp. fell after soaring Thursday on speculation a real estate company is eyeing its store locations and other property.

The Dow Jones Industrial Average dropped 85.58, or 0.80 percent, to 10,600.31 after rising 91.48 Thursday.

Broader stock indicators also sagged. The Standard & Poor’s 500 Index fell 7.42, or 0.60 percent, to 1,230.39, and the tech-focused Nasdaq Composite Index dropped 17.65, or 0.8 percent, to 2,156.90.

Bonds rose, with the yield on the 10-year Treasury note falling to 4.25 percent from 4.33 percent late Thursday. The U.S. dollar was up against the euro. Gold prices were higher.

The market swung skittishly throughout the week as oil hit record highs, the Federal Reserve raised interest rates for the 10th time in more than a year and the government released a mix of data that showed the economy continues to grow at a healthy clip.

The major indexes ended the week mixed. The Dow closed the week up 0.40 percent, the S&P; 500 rose 0.32 percent and the Nasdaq dropped 0.96 percent.

The market has been watching oil prices obsessively, afraid that higher energy costs could lower consumer spending and increase business expenses. The fear is that higher oil prices, coupled with the Fed’s streak of interest rate increases, could plunge the economy into a recession.

“The Fed raising interest rates at the same time oil is going up is like pumping the brakes twice,” said Stephen Wood, portfolio strategist at Russell Investment Group.

“If the Fed is raising rates, they will be successful in slowing down the economy. It will happen; it’s like the law of gravity.”

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