Oil prices and market trends

["M. Eakin" <mkeakin@hotmail.com>]

Here is an article from Reuters.  It appeared in the NYT tech section.  this 
is an account of the current trends in the market, with the fluctuation of 
oil and speculation of a shortage playing a major role.  I can see that if 
the US were to go to war, then there would almost certainly be a shortage at 
least for a little while in oil products.  I have faith that the shortage 
would be primarily market manipulation, and actual shortage to a lesser 
degree.  I for one do not think it is a wise idea to go to war, but I am all 
for folks cutting down the amount of hydrocarbons they are releasing into 
the atmosphere.  Have you SEEN the smog here in Austin?  Anyway, this is an 
interesting thing to have to look at the market.

M. Eakin

Warnings, war worries batter markets
Reuters, , Reuters

update Dour corporate forecasts and war fears sent stocks tumbling Monday, 
yanking the Nasdaq down to its lowest level since 1996.

Companies ranging from telecommunications gear maker JDS Uniphase to 
retailer Wal-Mart warned results may fall below or hit the bottom of a range 
of expectations, while the threat of war triggered a spike in oil prices.

Higher oil prices can hurt companies that rely on the fuel to manufacture or 
transport goods and dent the wallets of consumers through higher gasoline 
and heating costs.

Investors are "thinking about war again and about the price of oil going 
up," said Lance Zipper, director of equity trading for Brean Murray. "The 
mood in general is very negative and most people are demoralized. We just 
have to wait for earnings to come out. That's the only thing that can lead 
us out of these doldrums."

Profit warnings are bucking a trend that began late last year, when more 
companies offered positive outlooks and fewer offered negative ones, 
according to research firm Thomson First Call. The ratio between those 
differing outlooks kept improving into the second quarter of 2002, but the 
trend is starting to reverse.

"All we've seen are disappointments or guidance lower," said Keith Gertsen, 
head of Nasdaq trading for Deutsche Bank. "That, coupled with a lack of 
visibility, drags on the market."

The tech-laced Nasdaq composite index lost 36.16 points, or 2.96 percent, to 
1,184.93, closing below 1,200 for the first time since September 1996.

The Dow Jones industrial average fell 113.87 points, or 1.43 percent, to 
7,872.15. The broader Standard & Poor's 500 index slid 11.69 points, or 1.38 
percent, to 833.70. Although the three major market gauges have suffered 
four straight weeks of declines, the Dow and the S&P have not revisited 
five-year lows hit in July.

The CNET Tech Index slipped 23.47, or 2.87 percent, to 809.51.

JDS Uniphase, a supplier of components and modules for optical networks, 
added to the chorus of companies hurt by the sharp slowdown in the 
telecommunications market. Shares fell 27 cents, or more than 12 percent, to 
$1.87 after the Canadian company trimmed its first-quarter sales guidance 
amid slack demand for its fiber-optic equipment.

Microsoft was among the Dow's biggest percentage decliners, falling $2.23, 
or 4.7 percent, to $45.23, after SoundView Technology Group said the 
company's shares are expensive. Also, the firm said it will be difficult for 
Microsoft to show significant additional growth without a resumption of 
demand for personal computers and an increase in information technology 
spending.

War worries also weighed heavily. The United States is seeking a new U.N. 
resolution that authorizes the use of force if Iraq does not give United 
Nations arms inspectors unfettered access to the landlocked Middle Eastern 
country. President George W. Bush has been viewing military options for a 
possible attack on the oil-rich nation.

Investors don't know "when it'll begin, how much it'll cost or how long 
it'll last," said Tracy Herrick, chief investment strategist at Jefferies.

Oil and natural gas companies' shares surged as the price of oil rose on 
speculation the United States may attack Iraq. Another factor driving the 
price increase was tropical storm Isidore, which slammed Mexico's Yucatan 
peninsula and disrupted oil shipping.

The S&P oil and gas index climbed 1.5 percent. In New York, the leading 
crude oil futures contract jumped to near $31 a barrel.

U.S. Treasuries leaped, driving yields to 44-year lows, as investors flocked 
to safe havens. Yields on both five- and 10-year notes hit depths not seen 
since the summer of 1958, while rates on the two- and 30-year were the 
lowest recorded since they were first introduced in the 1970s.

Semiconductor stocks dragged on the market after Credit Suisse First Boston 
cut its investment outlook on 14 chip equipment makers, including Applied 
Materials and KLA Tencor, citing a dampened capital spending environment. 
Applied Materials fell 74 cents, or 6.2 percent, to $11.20, while KLA Tencor 
dropped $1.39, or almost 5 percent, to $26.63. Intel fell 77 cents to 
$14.13.

The current bear market in stocks is already the longest in 60 years. The 
S&P 500 index is down about 45 percent from its March 2000 high of 1,527.46, 
and within points of its most recent low of 797.7 set on July 23.

During the 1973-1974 bear market the S&P 500 lost 48.2 percent before 
recovering ground, according to data from Banc One Investments Advisors. If 
it breaks that barrier, it will be the biggest bear market drop since the 
54.34 percent decline in the bear market of 1937-1938.


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