Friday, June 22, 2007

Freaky Friday, But Room Below

Stocks continued in their recently intractable manner on Friday, as interest rates, high energy costs and the overall sustainability of the US economy weighed on markets.

Closing near the lowest levels of the session, the bellwether Dow Jones Industrials lost another 185 points to end the week down by 278 points, .

Dow 13,360.26 -185.58; NASDAQ 2,588.96 -28.00; S&P 500 1,502.56 -19.63; NYSE Composite 9,848.98 -111.81

The selling was as broad-based as the headline number would indicate, with only one Dow component - DuPont (DD) - showing up in positive territory.

Volume was moderate to heavy in advance of next week's FOMC meeting on interest rates and policy. Declining issues outpaced advancers by a 5-2 margin.

182 new lows nearly surpassed 196 new highs, suggesting further profit-taking, but that strong positions were still being maintained in top-performing issues.

There remains a cushion for stocks, with interim support in the 13,260 to 13,290 range on the Dow. Should the index fall through that level, a 4-7% decline over the short term could be in the offing. Even a setback of that magnitude would still leave the Dow - and likely, the other indices - in positive territory for the year, with the 3rd and 4th quarters still ahead.

Oil futures were higher again, with July contracts turned over to August. Light crude was up another 49 cents to end the week at $69.14.

While higher oil and gas prices have done damage to the overall economy, they haven't done enough to completely cripple it... yet, and prospects going forward are for some moderation as the summer holidays pass.

Prices at the pump are at a level that the oil companies have to see risk in the demand side of the equation. Any further hikes may induce American consumers to finally take draconian conservation measures, the result of which could cause an outright collapse in the industry and radically lower prices.

Don't count on it, though; the oil company execs have a couple of fingers firmly on America's arterial pulse and aren't about to kill the patient. They have gotten the price up above the desired $3.00/gallon for unleaded regular and will likely keep it there for the foreseeable future. It's a point at which their profits are already gargantuan and there's no need to go to the obscenity of outright gouging, even though many drivers presently maintain they're being gouged at current prices.

Gold and silver parted ways on the day, with gold higher by $2.80, closing at $357.00, as silver shed 7 cents to close at $13.02 per ounce.

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