Commodity Fever Finally Breaks [WSJ]
Oil, Copper Surrender Some Gains, Gold Has Biggest Fall in 2 Years;
But the Dow Rises 47.78 Points
By E.S. BROWNING
May 16, 2006; Page C1
Investments tied to world economic growth plunged yesterday, especially commodity prices and developing-country stocks, as expectations spread that recent interest-rate increases will slow world economic growth.
Defensive investments, such as bonds, drug-company stocks and consumer stocks, benefited from the worries.
Amid hopes that a cooling of the commodity rally will hold down inflation, blue-chip stocks rose. The Dow Jones Industrial Average, which had fallen heavily late last week, regained some ground, rising 47.78 points, or 0.42%, to 11428.77. It is now up 6.6% for 2006 and less than 300 points from its record finish of 11722.98, on Jan. 14, 2000. It was within 81 points of the record last Wednesday.
The Standard & Poor's 500-stock index also rebounded, gaining 0.25%, or 3.26 points, to 1294.50, up 3.7% this year. But the Nasdaq Composite Index, whose many technology stocks suffered, dropped to its lowest 2006 finish, falling 0.23%, or 5.26 points, to 2238.52. It still shows a gain of 1.5% for this year. More stocks fell than rose on the New York Stock Exchange and Nasdaq Stock Market.
The Dow Jones World Stock Index, excluding U.S. stocks, fell 1.84%.
"These commodities had such momentum, and they had been up so much that they had to come down at some point," said Todd Leone, head of listed trading at Cowen & Co. But declining commodity prices, together with a fall in bond yields, helped ease inflation fears. In the U.S., "the rest of the market hung in there pretty well," he said.
Traders finished the day hoping to see a revival of the U.S. stock rally. Investors once again began hoping for a "Goldilocks" economy -- not too hot, not too cold -- in which the Federal Reserve wouldn't need to cool the economy by raising interest rates and stocks would enjoy steady gains.
The big losers were industrial-commodities futures. In London, zinc fell 11%, tin 8.6% and copper 7%. But in New York, later in the day, copper futures were down 2.5%. Crude oil in New York fell $2.63, or 3.7%, to $69.41 a barrel. Gold, which has tracked other commodities as a hedge on inflation, fell 3.8% in New York, or $26.70, to $683.60 a troy ounce -- the biggest percentage decline in two years.
Energy and mining stocks, strong this year, slid. Shares of copper maker Phelps Dodge Corp. plunged 6.5%.
Investors will get the government's April wholesale-price data today, and April consumer prices tomorrow.
In major U.S. market action:
Stocks were mixed; bond prices gained. The 10-year Treasury note rose 9/32, or $2.81 for each $1,000 invested, pushing the yield down to 5.155%. The 30-year bond was up 16/32 to yield 5.264%.
The dollar strengthened, to 110.35 yen, up from 110.02, as the euro fell to $1.2786 from $1.2929. |
