Stocks fall on oil price climb

Stocks fall on oil price climb

	Published : Fri, 29 Jun 2007 21:04 By : Agencies Print this Story

NEW YORK (AP) - Stocks dropped Friday as investors, securing positions on the last day of the second quarter, sold off due to rising oil prices and lingering worries about subprime lending troubles.

Wall Street initially rose, encouraged by Commerce Department data that fit well with the Federal Reserve's decision Thursday to keep interest rates level. Policymakers said the economy appeared to be growing at a 'moderate' pace but offered a cautious reading on inflation, saying they awaited more evidence that costs were truly under control.

The latest batch of economic data showed that construction spending in May made its biggest jump in nearly 1-1/2 years, boosted by big government and commercial projects that offset the nation's weak residential market. The government also reported that consumer spending rose for the second month in a row, and that 'core' prices, which strip out food and energy, moderated to 1.9 percent over the last 12 months -- the lowest year-over-year rate in three years.

But the stock market couldn't hold onto gains. As investors prepared their portfolios for the launch of third-quarter trading next week, oil prices surged above $70 a barrel and jitters about subprime lending escalated.

'Oil's over $70, and that's going to worry some people,' said Brian Gendreau, investment strategist for ING Investment Management. 'And there's still a bit of a hangover from all these subprime problems. ... No one really knows the extent to which this is a serious problem or not.'

Last week, Bear Stearns & Cos. had to bail out a hedge fund with investments tied to subprime loans. The stock fell 3.6 percent Friday, and other financial companies followed.

In late afternoon trading, the Dow Jones industrial average fell 96.08, or 0.72 percent, to 13,326.20.

Broader stock indicators also dipped. The Standard & Poor's 500 index fell 11.29, or 0.75 percent, to 1,494.42, and the Nasdaq composite index fell 16.29, or 0.62 percent, to 2,592.08.

Bonds rose on heightened fears of terrorist activity in Great Britain. The yield on the benchmark 10-year Treasury note fell to 5.03 percent from 5.11 percent late Thursday.

The dollar was lower against other major currencies, while gold prices edged higher.

Oil futures rose $1.11 to $70.68 a barrel on the New York Mercantile Exchange. Crude closed above the psychologically important $70 level for the first time this year due to tight U.S. gasoline supplies.

However, many analysts said Friday's stock market drop was just a function of high volatility and end-of-quarter selling. Though the major indexes were headed to finish higher for the second quarter, June has been a rocky month, with stocks rising and falling due to rate-related worries.

'I don't read too much into the market on Friday; it's a lot of the same old, same old,' said Robert Schaeffer, portfolio manager of the Becker Value Equity Fund. 'There's probably some window dressing going on out there, some minor rebalancing, so there's some fluff in the market.'

Friday's economic news was positive, overall.

The University of Michigan's monthly index of consumer sentiment slipped in June compared to May by a smaller amount than expected, as did the Chicago Purchasing Manager's Index -- a precursor to the Institute for Supply Management's manufacturing index on Monday. The PMI, which measures Midwest manufacturing activity, also showed a decrease in its prices-paid index, a sign that inflation is easing.

Meanwhile, the U.S. Department of Agriculture said farmers this year planted 92.9 million acres of corn, a 19 percent jump from 2006 and the most corn planted since the last days of World War II. The U.S. record for corn planting was 95.5 million acres set in 1944.

In corporate news, Apple Inc. was in focus as the company releases its iPhone to the public. The gadget, which combines the functions of a cell phone, iPod and wireless Web browser, was to go on sale in the United States at Apple and AT&T stores at 6 p.m. Friday in each time zone. Apple rose $2.38, or 2 percent, to $122.94.

If the iPhone is a hit, it could cause weakness among other smart phone makers. On Thursday, Palm Inc. posted lower earnings for its latest quarter as sales of its signature Treo phone were offset by a downturn in handheld computers. Palm fell 58 cents, or 3.5 percent, to $15.98.

BlackBerry maker Research in Motion Corp., however, certainly didn't suffer, after announcing late Thursday a 3-for-1 stock split and a 73 percent surge in first-quarter profit. Research in Motion soared $34.30, or 21 percent, to $199.89.

In other corporate news, the founder of Commerce Bancorp announced his retirement Friday, raising speculation that the East Coast banking company might be up for sale. Commerce rose $2.69, or 8 percent, to $36.50.

The Russell 2000 index of smaller companies fell 5.24, or 0.62 percent, to 833.79.

Declining issues outpaced advancers by 9 to 7 on the New York Stock Exchange, where volume came to 1.18 billion shares.

Overseas, Japan's Nikkei stock average rose 1.15 percent. Britain's FTSE 100 rose 0.56 percent, Germany's DAX index rose 1.09 percent, and France's CAC-40 rose 0.81 percent.