- The Washington Times - Monday, August 8, 2005

NEW YORK (AP) — Stocks fell for a third straight session yesterday as oil prices soared to record highs after the U.S. Embassy in Saudi Arabia said it would be closed for two days because of security threats.

Wall Street retreated after crude prices jumped $1.63 to settle at $63.94 a barrel on the New York Mercantile Exchange. Meanwhile, gasoline futures also hit a record high of $1.86 per gallon on the Nymex, adding to the market’s gloom with heightened fears of a slowdown in consumer spending.

Before oil surged, acquisition news catapulted stocks in the opening minutes of trading. E-Trade Financial Corp. and Quest Diagnostics Inc. said they are buying rivals in deals worth more than $1.6 billion combined, and a British newspaper reported that Cisco Systems Inc. may bid for cell-phone maker Nokia Corp.

Investors also were worried about today’s meeting of Federal Reserve policy-makers, who are expected to raise the short-term federal funds rate by a quarter percentage point to 3.5 percent — the 10th increase since last summer.

The Dow Jones Industrial Average fell 21.10, or 0.2 percent, to 10,536.93. The Dow has lost 160.66, or 1.5 percent, since Thursday.

Broader stock indicators also declined. The Standard & Poor’s 500 index slid 3.29, or 0.27 percent, to 1,223.13, and the Nasdaq Composite Index dropped 13.52, or 0.62 percent, to 2,164.39.

Bonds fell, with the yield on the 10-year Treasury note at 4.42 percent, up from 4.39 percent Friday, the highest level since April. The U.S. dollar was flat against the euro, as gold prices moved slightly lower.

Wall Street will be watching closely today for changes to the Fed’s policy statement indicating it will step up its tightening regime. A policy change is unlikely, but analysts are split between those who feel the Fed’s rate increases have been too aggressive and those who think the central bank isn’t doing enough to stave off inflation.

“It isn’t that the Fed strategy isn’t clear, but it’s whether the Fed strategy will work,” said John P. Waterman, chief investment officer at Rittenhouse Asset Management.

Stock in companies with announced deals climbed, with E-Trade rising $1.24 to $16.10, and Quest up $1.71 at $49.21. Quest, the nation’s top provider of medical tests, said it is planning to acquire LabOne Inc. in a $934 million deal that will expand Quest’s share of the testing market. E-Trade will buy Harrisdirect for $700 million.

The possibility of a deal involving Cisco and Nokia was reported by British newspaper the Business, which said technology infrastructure company Cisco is considering buying a wireless company, and that Nokia had been identified as the most likely target. Cisco lost 4 cents to $19.25; Nokia rose 14 cents to $16.08.

The market for initial public offerings also may be warming up. Ruth’s Chris Steak House Inc. increased the size of its initial public offering to 13 million shares from 11.43 million, after Chinese Web search engine Baidu.com Inc. rose 354 percent in its market debut Friday.

Oil and gas producer Kerr-McGee Corp. rose $3.03 to $85.01 after the Wall Street Journal reported it is nearing a deal to sell its North Sea oil assets for about $3.5 billion.

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