Stocks on roller-coaster ride

Major gauges turn lower after crude sets record, erasing gains on economic reports.

By Jessica Dickler, staff writer

NEW YORK ( -- Stocks turned lower Wednesday after oil set a record high, erasing gains from economic reports that showed a dip in inflation and a surprise increase in pending home sales.

The Dow Jones industrial average (up 8.86 to 13,220.85, Charts) hovered near breakeven while the broader Standard & Poor's 500 index (down 2.89 to 1,452.38, Charts) lost 0.2 percent.


The tech-heavy Nasdaq composite index (down 14.95 to 2,531.32, Charts) slipped 0.6 percent.

Oil prices rose after the government's weekly report on crude inventories, released a few minutes before schedule, showed a huge drawdown last week. U.S. light crude for September delivery added 14 cents to $78.35 a barrel after reaching a peak of $78.77, according to Reuters.

All three major gauges got off to a rocky start Wednesday on the heels of a stock selloff in the previous session.

But stocks bounced into the black briefly after the Institute for Supply Management reported that nationwide manufacturing activity fell to 53.8. Economists expected the closely watched index to slip to 55.5 for July from 56 in June. But any reading above 50 is a sign of growth in that sector.

And, the National Association of Realtors' pending home sales index jumped 5 percent to 102.4 in June. Economists surveyed by had forecast the index would another slip 0.6 percent after a revised 3.7 percent drop in the May report.

"The markets reflects the news: one minute it's good, one minute it's bad," said Hugh Johnson, chairman of asset management company Johnson Illington Advisors. "The question is what is going to be the impact on the economy and earnings. Will this storm cause a panic or will it dissipate?"

In corporate news, Rupert Murdoch finally won his battle for the publisher of The Wall Street Journal. Dow Jones (up $0.79 to $58.17, Charts) agreed to be taken over by News Corp. (up $0.06 to $21.18, Charts) for $5.6 billion.

Time Warner (down $1.63 to $36.59, Charts), which owns, reported second-quarter earnings that topped analysts' estimates and said it has authorized an additional $5 billion stock repurchase.

Kraft Foods (down $0.05 to $32.70, Charts) posted higher quarterly profit, but shares of the Oreo maker fell slightly.

Alltel (up $0.54 to $66.49, Charts, Fortune 500) rose nearly 1 percent after the wireless service posted a higher quarterly profit as revenue rose.

Cigna (down $2.96 to $48.68, Charts, Fortune 500) reported lower net income, but operating earnings beat Wall Street expectations. Shares of the health insurer sank 6 percent.

Shares of Qwest Communications (down $0.22 to $8.31, Charts, Fortune 500) also fell 3 percent after the telecommunications carrier said second-quarter profit rose, but came in short of expectations.

After the closing bell Tuesday, Whole Foods (up $2.36 to $39.40, Charts, Fortune 500) posted profit that fell less than Wall Street expected, sending shares up 5 percent.

And Blackboard (down $6.53 to $37.70, Charts) tumbled 15 percent after the educational software company forecast third-quarter sales below Wall Street expectations.

Also on Tuesday, news that a third Bear Stearns (down $3.38 to $117.84, Charts, Fortune 500) hedge fund is reportedly in jeopardy added to jitters. The Wall Street Journal reported Tuesday night that a Bear Stearns fund with about $900 million in mortgage investments is refusing to return investors' money. Shares of the investment bank tumbled 4.5 percent.

And American Home Mortgage Investment Corp. (up $0.07 to $1.11, Charts) said that lenders had cut off its access to credit and that it may have to liquidate its assets.

U.S. auto sales are on tap for later in the session, with sales tracker forecasting an 8 percent drop in industrywide sales, with General Motors (down $0.18 to $32.22, Charts, Fortune 500) and Ford (down $0.05 to $8.46, Charts, Fortune 500) both expected to post far larger declines. This could be the first month on record that domestic brands fall below 50 percent of overall U.S. sales.

Treasury prices were little changed with the yield on the benchmark 10-year note at 4.73 percent. Bond prices and yields move in opposite directions.

The dollar gained against the euro and was little changed versus the yen.

Overseas markets were hammered in earlier trading. Asian markets plunged and European stocks sank in afternoon trading. Top of page