- The Washington Times - Wednesday, July 6, 2005

NEW YORK (AP) — Stocks tumbled yesterday as oil prices climbed to a new record on fears of refining shortages and prompted investors to look past a report showing strong growth in the service sector of the economy. The Dow Jones Industrial Average dropped more than 101 points.

Oil closed above $61 per barrel for the first time as investors fretted that Tropical Storm Cindy would hurt production in the Gulf of Mexico and refinery capacity along the coast. Reports of power outages at two Valero Energy Corp. refineries heightened investors’ fears. A barrel of light crude settled at $61.28, up $1.69, on the New York Mercantile Exchange.

A spike in activity in the service sector failed to stem the losses. The Institute for Supply Management’s services index for June came in at 62.2, higher than the 58.9 economists had expected and better than May’s 58.5 reading.

“There are a number of crosscurrents in the market right now that make it difficult to find a direction,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC. “The services report was a very pleasant surprise, and added to generally positive economic data. But then you have oil, which could slow the economy.”

The Dow fell 101.12, or 0.98 percent, to 10,270.68 after rising 68 points Tuesday.

Broader stock indicators also fell. The Standard & Poor’s 500 Index was down 10.05, or 0.83 percent, at 1,194.94, and the Nasdaq Composite Index lost 10.10, or 0.49 percent, to 2,068.65.

Bonds gained ground after a strong selloff in the previous session. The yield on the 10-year Treasury note fell to 4.07 percent from 4.10 percent.

Optimism about the U.S. economy pushed the dollar to an 11-month high against the Japanese yen. The greenback lost ground against the euro and other major currencies. Gold prices rose.

Even as the dollar rises, oil prices have continued to climb as well — confounding investors trying to determine the economy’s direction. While the Labor Department’s job creation report tomorrow and the first wave of second-quarter earnings next week should clarify matters, the markets will have very little impetus to move higher until then.

Valero Energy dropped $1.46 to $83.50 after the company said the outages would reduce oil refining capacity slightly.

PacifiCare Health Systems rose $4.41 to $77.09 after the company confirmed it would be acquired by UnitedHealth Services Inc. in a $8.1 billion cash-and-stock deal. It was the second-biggest acquisition ever recorded in the health care sector. UnitedHealth added 27 cents to $53.50.

Halliburton Inc. fell 93 cents to $48.71 even after the U.S. Army awarded the company a $4.97 billion contract to provide logistics support in Iraq. The contract is $1 billion more than the previous year.

General Motors Corp. won a $253 million judgment from the federal government in connection with an underfunded pension plan, the Wall Street Journal reported, though the government is likely to appeal. GM dropped 58 cents to $34.22.

Regional bank Zions Utah Bancorp lost $4.69 to $68.67 after it announced it would buy Texas bank Amegy Bancorp Inc. for $1.7 billion in cash and stock, or $23.32 per share. Amegy fell $1.05 to $21.93.

Declining issues outnumbered advancers by nearly 4 to 3 on the New York Stock Exchange, where preliminary consolidated volume came to 1.89 billion shares, compared with 1.77 billion traded on Tuesday.

The Russell 2000 index of smaller companies was down 4.96, or 0.76 percent, at 648.27.

Overseas, Japan’s Nikkei stock average fell 0.11 percent. In Europe, Britain’s FTSE 100 was up 0.76 percent, France’s CAC-40 gained 0.64 percent for the session, and Germany’s DAX index rose 0.26 percent.

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