[NYTr] Booming Economy: Stocks Flat as Dollar Falls, Oil Soars

[All the News That Doesn't Fit]

AP - Sep 12, 2007
http://hosted.ap.org/dynamic/stories/W/WALL_STREET?SITE=JRC&SECTION=HOME&TEMPLATE=DEFAULT

Stocks Flat as Dollar Falls, Oil Soars

By MADLEN READ
AP Business Writer

NEW YORK (AP) -- Wall Street finished essentially flat Wednesday, with
investors still confident the Federal Reserve will lower rates next
week but treading cautiously as oil prices crossed $80 a barrel for the
first time and the dollar extended its decline.

Investors widely expect the central bank next Tuesday to lower the
benchmark federal funds rate by a quarter percentage point. The
decision has not been guaranteed, though, and furthermore, many
investors worry that a quarter-point rate reduction might not be enough
to address investors' worries over the ongoing housing slump and credit
market tightness.

"The more urgent problem than what the price of money is, is the
availability of money," said John Merrill, chief investment officer of
Tanglewood Capital Management in Houston. "There's such a scramble for
cash."

Meanwhile, crude oil's spike above $80 a barrel, the highest it's ever
been in intraday trading, and a weakening dollar fed concerns about
inflation. Accelerating inflation is not only a threat to consumer
spending - a pillar of the economy that Wall Street fears is weakening
- but it also gives the Fed a reason to keep rates where they are.

Crude oil settled at a record $79.91 a barrel on the New York
Mercantile Exchange after the U.S. government reported declines last
week in crude and gasoline supplies. Jack Ablin, chief investment
officer at Harris Private Bank, pointed out that price surges in
commodities hit Americans particularly hard because they're denominated
in the dollar, which on Wednesday dipped to a new record low versus the
euro.

"I think the Fed has to pay attention to this. They need as much elbow
room as they can get to make a decision they feel is right," Ablin
said. "Should this dollar continue to fall, it has the potential to
limit the Fed's ability to respond to the economy."

However, rising energy prices and a falling dollar have some advantages
on Wall Street. High energy costs evince strong global demand, and
boost the profits of oil and gas companies, while a weaker dollar
benefits U.S. companies that draw revenue from overseas.

The Dow Jones industrial average fell 16.74, or 0.13 percent, to
13,291.65, after weaving in and out of positive territory throughout
the session. A day earlier, the blue-chip index soared 180 points.

Broader stock indexes were narrowly mixed. The Standard & Poor's 500
index rose 0.07, or 0.01 percent, to 1,471.56, and the Nasdaq composite
index fell 5.40, or 0.21 percent, to 2,592.07.

Government bond prices slipped. The yield on the 10-year Treasury note,
which moves opposite its price, rose to 4.41 percent from 4.36 percent
late Tuesday.

The dollar extended its slide against the euro, hitting a new record
low amid expectations of a rate cut from the Fed, which would make the
U.S. currency a less attractive investment vehicle. The 13-nation euro
rose as high as $1.3914 in late European trading, surpassing its
previous record of $1.3852 reached July 24.

The dollar also weakened against the yen - an important currency for
the stock market because of the yen carry-trade, where people invest
their yen in higher-yielding dollar assets. When the dollar falls
against the yen, people tend to exit these positions.

Gold prices also gained, and in other commodities trading, wheat rose
above $9 a bushel to a fresh peak.

As Americans deal with rising food and energy costs, the housing and
credit markets appear to remain far from a rebound. Treasury Secretary
Henry Paulson said Wednesday that financial market turmoil will take
some time to be resolved, especially in the area of subprime mortgages,
which are home loans given to borrowers with spotty credit histories.

Home buying is not at a standstill, though. The Mortgage Bankers
Association's weekly survey showed that as rates fell in the week ended
Sept. 7, mortgage application volume rose 5.5 percent, refinance volume
jumped 6 percent, and the purchase index increased 5.2 percent,
adjusted for the Labor Day holiday.

Declining issues outnumbered advancers by about 9 to 7 on the New York
Stock Exchange, where volume came to 1.29 billion shares, up from 1.16
billion shares on Tuesday but still lower than usual.

The Russell 2000 index of smaller companies fell 4.37, or 0.56 percent,
to 777.90.

In Asia, Japan's Nikkei stock average fell 0.50 percent after Japanese
Prime Minister Shinzo Abe announced Wednesday he would resign, ending a
troubled year-old government that has suffered damaging scandals.

In Europe, Britain's FTSE 100 rose 0.41 percent, Germany's DAX index
rose 0.20 percent, and France's CAC-40 rose 0.53 percent.

On the Net:

New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com

© 2007 The Associated Press.